EU27 imports from China were down 11% in February. In the first two months of 2024, imports from China decreased to €74 billion from €90 billion a year earlier, marking a 17%% drop in imports by value.
EU27 exports to China were down 13% in February. In the first two months of 2024, exports to China decreased to €34 billion from €37 billion a year earlier, marking a 8% drop in exports by value
Morgan Stanley indicates China exports are driven by higher volumes and lower prices. Specifically in Q1, volumes increased 14%, but prices fell 12%. We doubt that the EU and the US will be happy.
Meanwhile, the EU reduced its trade deficit with China by €13 billion
In March 2012, the governor of China’s central bank (PBoC) praised himself during that year’s Two Sessions political meetings, citing…
the trade deficit China experienced in the first two months of 2012 was a positive thing for China.
The PBoC vice-governor and head of SAFE, the State Administration of Foreign Exchange, also concurred:
China has made a remarkable achievement in reducing the trade surplus, promoting a more balanced foreign trade, expanding domestic demand
Later in the same year, in November 2012, Xi Jinping assumed leadership, and now, the remarks made by the governor and vice-governor of the PBoC seem laughable.
In the SOAPBOX issue of Feb 6, we claimed that China’s so-called ‘new productive forces’ were four and not three (e-cars, PV panels, Li-ion batteries).
We mentioned cross-border e-commerce (CBEC) as the fourth one, raising some eyebrows among readers.
Now, the Chinese government brags that CBEC is also a ‘new force.’ CBEC trade increased by 10% in the first quarter, reaching US$80 billion. It is about 6% of China’s total trade.
In China, surplus is what matters, so notice that the split of those $80 billion is $62 billion in CBEC exports and $18 billion in CBEC imports. A ratio of export/import of 3.4, or a surplus via CBEC of more than $40 billion in the first quarter.
The European Union and the United States couldn’t help but notice. We are convinced that measures to address the flood of goods sent from China via CBEC to these two blocs will be taken soon. In the case of the European Union, two-thirds of parcels entering from China are undervalued to avoid customs duties on imports. The threshold exempt from duties is €150. We believe the Commission wants to put an end to this
The German chancellor visited Beijing. Surely, Mr. Xi talked with him about China’s trade with the European Union. No doubt, Mr. Scholz also wanted to talk about trade, but perhaps with a different twist – that of the unlimited friendship the Chinese leader claims to have with his Russian counterpart
China’s GDP announced on April 16 for Q1 2024 was 29.63 trillion yuan, while SOAPBOX forecast on April 6 was 29.42 trillion yuan. According to the Chinese government, this represents a 5.3% increase in real terms compared to Q1 2023. It appears that the government considers prices to have decreased by 1.1% compared to Q1 2023.
The GDP for the preceding quarter (Q4 2023) was 34.8 trillion yuan.
The leader of the band The Smiths wrote the lyrics for the acclaimed hit Bigmouth Strikes Again. The lyrics conveyed his dislike for the media and critics, whose opinions he considered judgemental. We wonder if China’s Ministry of Finance will react as Morrissey did decades ago now that Fitch, the American credit agency, strikes again
A week after cutting its projection for China’s sovereign credit rating, Fitch has lowered its outlook for China’s state-owned banks to negative from stable.
Chinese consumers are spending cautiously, especially when compared with growth rates in the past decade. Q1 data shows total retail sales with a 4.6% compound annual growth rate since 2021. If we remember correctly, the data is nominal
In Q1, though, there is a small increase in the percentage of total retail sales compared to GDP. Handle the figures on the graph with care; they do not include services.
-
42.2% (2021)
-
40.2% (2022)
-
40.4% (2023)
-
40.6% (2024)
Predicting China’s actions on its yuan exchange rate policy isn’t easy, and we’ve learned that the hard way after many failed attempts. We humbly avoid making guesses
If anything, the exchange rate based on China Customs data shows a very strong correlation with the yield of the 1-year U.S Treasury Bill.
Iran is once again in the spotlight and not for good reasons.
From a trade perspective, Iran is the sole country engaged in bartering with China. The latter imports copper cathode from the Islamic republic in exchange for auto parts. The total value of this mutual bartering amounted to a quarter of a billion US dollars last year.
More on Iran in the next entry
Notice the remarkable surge in Chinese imports of crude oil from Malaysia, according to China Customs. It’s worth noting that this oil may not actually originate from Malaysia, as Malaysia does not report exports of crude oil to China.
Furthermore, the price is 15% below what China pays overall for its imported crude oil. Malaysia appears as the fourth supplier of crude oil to China, providing the equivalent of one million barrels per day.
It is reported that China’s small refiners buy about 90% percent of all Iranian oil exports and they turn the discount oil into competitively-priced gas and diesel. The oil cargoes are said to be transshipped in a third country and imported as though the oil originated somewhere else.
Do not underestimate China Customs. They are aware of what is happening and conveniently declare that the crude oil “from Malaysia” is imported under the Customs regime: goods entering and exiting bonded supervision areas
Flags of Convenience (FoC) occur when a ship is registered under the flag of a country other than the country of ownership. This practice always generates controversy, particularly as seafarers complain about the working rights and conditions aboard some (not all) FoC vessels
The Marshall Islands is a tiny country of around 200 km2, which, by the way, is one of the few countries maintaining formal diplomatic relations with Taiwan. Political analysts say that China is exerting influence over the islands, similar to Nauru, another island country, and its recent decision (January 2024) to establish diplomatic relations with China.
Half of China’s “exports” to this country are ships that will never berth there; it’s simply that the owners, situated elsewhere, have decided to register them under the Marshall Islands flag. In fact, about 15% of China’s ship exports are “exports” to this country – with barely some dozen thousand inhabitants. We forecast that more than $2 billion of these “exports” will occur in 2024
Source China Customs
In a working paper, three staff members of the European Central Bank compare the spillovers of China’s financial shocks to the rest of the world with those of the US’s shocks. The summary
If China catches a cold, the rest of the world just sneezes, mostly because of commodities
The impact of a simple change in US monetary policy is a way more important driver than China’s macro risk shocks – authors say.
Despite China’s rhetoric promoting a high-level financial opening-up, the reality is that its integration with global finance is abysmally lower than its role in the global trade of goods. China’s perennial “financial security” concerns act as a sort of barrier for a broader integration into the global financial system.
Minister of Commerce Wang Wentao meets with CCCEU and Chinese EV & battery companies in the EU, urging the European Union to revise its perception of the global competitiveness of China’s new energy vehicles.
Among the attendees, BYD, Geely, SAIC, NIO, CATL, FAW, Great Wall, Seres Group, CATARC, Gotion, and SVOLT, as well as representatives of the China Chamber of Commerce to the EU (CCCEU).
The head of the African Development Bank (AfDB) urged African countries to put an end to natural resource-backed loans in an interview to the Associated Press some time ago.
At least 11 African countries have taken dozens of loans worth billions of dollars secured with their natural resources since the 2000s, and China is by far the top source of funding through policy banks and state-owned companies.
Now, Niger has secured a $400 million loan with China’s state-owned China National Petroleum Corporation, which will be repaid in crude oil.
The practice is not unique to China; the AfDB director mentioned quite a few non-Chinese companies acting similarly
SOAPBOX will be the speaker at an upcoming online event, which promises to be worthwhile for many of you. Mark your calendars for April 29th. Registration is free.
You’ve reached the end of the newsletter, congratulations!
We are committed to sharing with you the best trade analysis we have to offer.
If you would like to share something with us, feel free to comment in the section below or drop us a line at [email protected]