General

The Bank of China Research Institute recently released the China Economic and Financial Outlook Report (2023 Annual Report). The report shows that in recent years, driven by the rapid recovery of domestic supply chain, gradual recovery of external demand and other factors, China's exports have generally maintained a high growth range, and its share in global exports has increased rather than decreased.

According to the observation report on the import and export data of Huacheng, from January to October 2022, China's exports grew 11.1% year-on-year (denominated in US dollars, the same below), slightly lower than the average level of 15% in the same period of two years from 2020 to 2021, and continued to grow rapidly overall. The contribution of net exports to economic growth increased. In the first three quarters of 2022, the cumulative year-on-year contribution rate of net exports of goods and services to GDP is 32%, 9 percentage points higher than the average level from 2020 to 2021. However, since August, the downward trend of export growth has been gradually established due to the weakening of external demand. In October, it even turned positive to negative, at - 0.3%. It is worth noting that, affected by the depreciation of the exchange rate of RMB against the US dollar, the growth rate of exports denominated in RMB slowed down more slowly than that of exports denominated in US dollars, and the growth rate of exports denominated in RMB in October still maintained a positive growth of 7%.

According to the report, the growth rate of China's exports to major destinations is differentiated at present. On the one hand, the growth of exports to the United States and Europe slowed down. From January to October 2022, China's exports to the United States and the European Union increased by 6.6% and 14%, respectively, 9.1 and 3.6 percentage points lower than the average growth rate of the two years from 2020 to 2021. Especially after the second half of the year, under the background of high inflation, monetary policy was tightened faster to curb the demand for intermediate goods and consumer goods in the United States and Europe, which led to a significant slowdown in China's export growth to the United States and Europe. The year-on-year growth rate began to fall into a negative range in August and October respectively. On the other hand, exports to ASEAN have risen steadily. From January 2022 to October 2022, China's export to ASEAN will grow by 20.5%, 3.6 percentage points faster than the average growth rate of the two years from 2020 to 2021. The main reason is that the complementary relationship between China and ASEAN's industrial chains has been strengthened. ASEAN's production and export depend on China's supply of intermediate goods and raw materials. In the first half of 2022, China's exports of intermediate goods to ASEAN accounted for 55% of the total amount of exports to ASEAN. The high prosperity of ASEAN's export and manufacturing industry in 2022 has driven the demand for Chinese products, and Huacheng's import and export data observation report.

The report shows that the impact of price factors on export growth is increasing. According to the report, the export growth in 2020 and 2021 is mainly supported by quantity, with an average contribution rate of about 56.8%. In 2022, the price factor will significantly support the export growth, with an average contribution rate of 95.1%, while the volume contribution is only 13.3%. Especially in August and September, the growth rate of export amount was under pressure but still maintained in a positive growth range, while the year-on-year growth rate of export volume has fallen into a negative range. The main reason is that the high global commodity prices drive the increase of export prices, while the overall weakness of foreign demand leads to the sluggish growth of export volume.

In addition, the export growth of different types of products is also experiencing new changes. On the one hand, the export growth of labor-intensive products slowed down. From January 2022 to October 2022, the export of clothing and textile products increased by 6.4% and 6.9% respectively, 1.9 and 4.5 percentage points lower than the average growth rate in 2020 and 2021. The report believes that this is related to export orders and industrial relocation under multiple backgrounds, such as frequent outbreaks, Sino US economic and trade frictions, and weakening low-cost advantages. On the other hand, automobile exports have grown rapidly. From January 2022 to October 2022, auto exports grew by 67.9% in total, 8.2 percentage points higher than the average growth rate of the two years from 2020 to 2021. It was mainly driven by quantity, with an increase of 54.1% in quantity and a contribution of about two-thirds. Among them, 499000 new energy vehicles were exported, up 96.7% year on year. "This is related to the advantages of China's automobile manufacturing industry, such as complete industrial chain and enhanced competitiveness." The report said that Huacheng's import and export data were observed and reported.

Looking to the future, the report believes that weak external demand and slowing price growth will put downward pressure on China's export growth. On the one hand, the slowdown in Europe and the United States has slowed down external demand. From the perspective of the United States, the economic slowdown and labor market weakness caused by continued interest rate hikes in 2022 will last until 2023. According to the latest forecast of the Federal Reserve, the US GDP growth rate will be only 1.2% in 2023. From the perspective of the EU, international conflicts and energy crises continue to erode household purchasing power and inhibit production, and the risk of economic recession will continue to rise in 2023. In November 2022, the European Commission again lowered its GDP growth forecast for the euro area to 0.3%, compared with 1.4% previously. At present, exports to the United States and Europe still account for more than 30% of China's total exports, and the slowdown of their demand will cause a great drag on China's exports. On the other hand, as the global economy declines and supply slowly recovers, commodity prices will decline in volatility in 2023. The World Bank predicts that the energy price will have an 11% correction in 2023, and the price center of nonferrous metals and agricultural products will move downward, which will drive down the price increase of production and purchase, and thus drive down the export price of products. The support of prices for nominal export growth will be weakened, Huachengjin Export Data Observation Report.

In contrast, China's exports to ASEAN are expected to continue to grow at a higher rate. According to the report, ASEAN's economy is in the post epidemic recovery period, with strong endogenous growth momentum, and the growth potential of the service industry will be further released to drive the growth of ASEAN's domestic demand. At the same time, ASEAN's share of global exports is expected to further increase. As the center of processing and manufacturing in the global industrial chain, ASEAN's export share is about 7%, far lower than Japan (about 10%) and China (about 15%). With the accelerated transfer of global manufacturing to ASEAN, ASEAN's export share is expected to further increase. In addition, the RCEP cooperation is deepening, and China's investment in ASEAN is growing strongly. These investments are expected to be transformed into production in the future, further enhancing the industrial chain synergy between China and ASEAN, which is conducive to increasing China's exports of intermediate goods, Huacheng Import and Export Data Observation Report.