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Chinese exports went down by USD 71,342 million to USD
281.4 billion in January-February 2020 relative to the preceding
year according to the IHS Markit Global Trade Atlas database. It
represents a fall of 20.2% in comparison to 2019.
The worst affected trade partners were the US (USD
-16,235 million), Hong Kong (USD -7,477 million), Japan (USD- 5,500
million), South Korea (USD -3,096 million) and Germany (USD -3,031
million)
The worst affected commodity groups at the level of HS2
were electrical machinery and equipment (HS2 85; USD - 15.255
billion), nuclear reactors, boilers, machinery and mechanical
appliances (HS2 84; USD - 11.393 billion) as well as furniture and
accessories (HS2 94; USD - 4.053 billion)
The contraction in exports relative to 2019 can extend
into March 2020 and onwards as is shown by IHS Markit new export
orders for March (36.39 in February 2020 and 46.42 in March 2020)
and the weekly pattern of dry bulk shipments from China from the Commodities at Sea
database
The impact on Chinese exports by the trade
partner
What has been the impact of COVID-19 on Chinese trade? Having
access to IHS Markit Global Trade
Atlas we are able by now to look at the data reported
by China for the first two months of 2020. It is important to
stress that Chinese authorities have provided the data jointly for
two months. Thus, we have decided to compare the data in the
preceding year (January-February 2019).
Chinese exports went down by USD 71,342 million to USD
281.4 billion. It represents a fall of 20.2% in comparison to
2019.
The worst affected trade partners were the US (USD
-16,235 million), Hong Kong (USD -7,477 million), Japan (USD- 5,500
million), South Korea (USD -3,096 million) and Germany (USD -3,031
million).
Out of the main trade partners (with exports value exceeding USD
100 million) the relative drop in exports was the largest for Benin
(-68,7%), Algeria (-41,9%), Syria (-39.6%), Macau (-38.1%),
Mozambique (-31.1%) and the United Kingdom (-29.0%). The Chinese
exports contracted by more than 25% for Canada, Kenya, Sweden, the
United States, Senegal, Mongolia, Switzerland, Laos, Chile, and
Qatar.
It is worth stressing that the export value increased in trade
with 56 trade partners with the highest increases in absolute terms
for Iran, Turkey, and Cyprus. In total, the trade with the group
increased by USD 1,386 million. The total for the remaining
countries including the main trade partners was equal to USD -
61,697 million thus clearly outweighed the first one.
The impact on Chinese exports by commodity
group
The impact of COVID-19 on Chinese exports was highly asymmetric
across industries and commodity groups. The largest contraction
relative to 2019 was observed in electrical machinery and equipment
(HS2 85; USD - 15.255 billion), nuclear reactors, boilers,
machinery and mechanical appliances (HS2 84; USD - 11.393 billion)
as well as furniture and accessories (HS2 94; USD - 4.053 billion).
The shock was widespread affecting both traditional as well as
high-tech industries and propagated globally due to existing
commercial, logistics and production relations affecting the global
value chains. The outbreak for the first time showed the exposure
of most of the world to the Chinese economy.
Prospects for Chinese exports
The flattening of the pandemic curve allowed the Chinese
authorities to lift some of the sanctions (at least temporarily).
The economic activity can gradually accelerate. However, the local
epidemic became pandemic affecting by now all countries of the
world including China's main trade partners (such as the US,
Germany, France, Italy, Spain, the UK) thus weakening their demand
for Chinese goods. Thus we should expect rather a gradual recovery
over a prolonged period.
It is interesting to note a clear V pattern emerging in the PMI
readouts for China in both manufacturing as well as new export
orders. Still, in March, the second one remained significantly
below the benchmark value of 50.0 still indicating contraction.
Thus the incoming data for Chinese exports at least for March
should still be below 2019 levels. The situation in Q2 and onwards
will depend on the shape of pandemic curves in China and its main
trade partners. We cannot expect a major improvement though.
As the official trade data arrives with a delay of approximately
two months, it is interesting to look at the data extracted from
IHS Markit Commodities at Sea
database. The chart below shows the transaction tons for
completed international shipments of dry bulk from China weekly in
comparison to the average shipments in the three preceding years
(2017-2019). The falls are significant (exceeding 30%) and extend
beyond January and February 2020 well into March, however, they
seem to slowly decrease. It seems to be in line with our prior
conclusions and the IHS Markit PMI readouts.
Background information
China is the second-largest economy of the world after the US
and thus plays a major role in global economic relations being the
manufacturing hub and a major exporter. It was hit first and hard
by the outbreak of the severe acute respiratory syndrome
coronavirus 2 (SARS-CoV2) in December 2019.
On 31 December 2019, the World Health Organization (WHO) China
Country Office was informed of cases of pneumonia unknown etiology
detected in Wuhan City, Hubei Province of China. The Chinese
authorities identified a new type of coronavirus, which was
isolated on 7 January 2020. On 30 January 2020, WHO issued a Public
Health Emergency of International Concern. Later in March, it
declared a global pandemic.
Considering the lessons from SARS, the Chinese government
reacted fast and immediately informed the international bodies. The
measures introduced by China to contain the outbreak at its source
were unprecedented - the quarantine has been levied originally on
the city of Wuhan (the source of the outbreak) and later extended
to the whole province of Hubei (affecting more than 60 million
people). Later social distancing was introduced nationally. Active
surveillance and widespread testing followed. Manufacturing
production and services were to a large extent frozen which had an
obvious impact on economic activity, including exports. Large scale
public intervention was introduced to help the enterprises survive.
With all these measures China was able to flatten the pandemic
curve with 83,597 confirmed cases of COVID-19 and 3,351 reported
deaths by April 14, 2020. The epidemic is far from over but the
country has started to unfreeze the economy for several weeks
now.
This article is based on data from IHS Markit Global Trade Atlas, Commodities at Sea database and
other resources from IHS Markit if not stated otherwise.