Explainer | China trade: everything you need to know

China’s export-driven economy was the workshop of the world for decades, accounting for 13 per cent of the world’s exports in 2017
After a bruising few years for China’s trade economy, exports have come roaring back in recent months, even as imports lag

China trade

Andrew Mullen

Published: 6:15pm, 8 Dec 2020

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China’s export-driven economy was the workshop of the world for decades. In 2001, when China joined the World Trade Organization (WTO), the country accounted for 4 per cent of the world’s exports, and by 2017, that had risen to 13 per cent.

Imports also skyrocketed as consumption grew in China.

The trade war with the United States damaged China’s exports, as tariffs made its goods more expensive for American customers.

The coronavirus also had a mixed impact on China’s trade. An early lockdown met exports suffered, while an economic shock domestically has dampened long-term demand for imports. But with much of the rest of the world in need of the sorts of lockdown goods China makes, its exports have been booming for the past six months.

What is the state of China’s exports?

China’s exports grew by 27.9 per cent in May 2021 from a year earlier to US$263.9 billion, down from the 32.3 per cent growth seen in April. This was also below the result of the Bloomberg survey, which predicted 32 per cent growth.

This was the 11th consecutive period of export growth, but the export drop of 3.3 per cent in May 2020 means the latest figures also started from a low base.

What is the state of China’s imports?

Imports grew by 51.1 per cent in May 2021 from a year earlier to US$218.4 billion, up from the 43.1 per cent growth in April, according to data from the National Bureau of Statistics. This was below the median result of a survey of analysts conducted by Bloomberg, which predicted 54.5 per cent growth.

This was the eighth consecutive period of import growth and the fastest import growth since January 2011, although the fact that imports fell by 16.7 per cent in May 2020 due to the impact of the coronavirus is a factor in the size of the increase this year.

What is China’s trade balance?

China’s total trade surplus stood at US$42.85 billion in April 2021, compared to US$13.8 billion in March.

What is China’s trade balance with the United States?

China's imports from the United States rose by 69.2 per cent in the first quarter to US$46.545 billion, while China’s exports to the US rose by 74.7 per cent to US$119.183 billion.

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How did the trade war impact China’s trade?

The US and China are the two largest economies in the world, and bilateral trade between the US and China totalled around US$586 billion in 2020.

However, that trade is lopsided, with the US running a large trade deficit with China, and this became a major political issue in the 2016 US presidential campaign. The US trade shortfall rose to US$375.6 billion in 2017 before the start of the trade war, up from US$103.1 billion in 2002.

The US and China imposed tit-for-tat tariffs on each other’s goods, meaning buyers in the opposing country needed to pay more to import them.

At its peak at the end of 2019, the US had imposed tariffs on more than US$360 billion worth of Chinese goods, while China had retaliated with import duties of their own – worth about US$110 billion – on US products.

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How did the coronavirus impact China’s trade?

China’s exports slumped to minus 17.2 per cent in combined figures for January and February 2020 due to the impact of the coronavirus, while imports plunged 16.7 per cent in May due to weak demand in the second-largest economy.

In May 2020, exports of medical equipment and instruments rose 89 per cent from a year earlier; shipments of textiles, yarns and fabrics (including masks) rose 77 per cent; and exports of plastics (including medical protection equipment) increased 54 per cent, noted Shen Jianguang, chief economist at JD Digits, the fintech arm of e-commerce firm JD.com.

Now, exports are booming, with China capitalising from lockdowns around the world to take market share from other exporting nations.

What impact will the dual circulation strategy have on China’s trade?

The so-called dual circulation strategy places a greater focus on the domestic market, or internal circulation, and is China’s plan for adapting to an increasingly unstable and hostile outside world. An important part of this is generating high-value exports, with international circulation the second prong of the strategy.

But while the process of economic liberalisation should be increased in preparation for a long-term technological and economic rivalry with the US, the dual circulation plan also includes lowering barriers for investors and a motivation to secure regional trade pacts, according to economists and advisers.

Vice-Premier Liu He, the top economic adviser to President Xi Jinping, has also reiterated that China’s new focus on its domestic market and technological independence does not mean it is cutting links with the rest of the world.

What is the outlook for China’s trade?

China is expected to be the only Group of 20 nation to show a positive economic growth rate in 2020 after its economy grew by 2.3 per cent.

Global trade dropped 9 per cent in 2020, with trade in goods declining by 6 per cent and trade in services decreasing by 16.5 per cent, according to the UN Conference on Trade and Development.

Want to know more?

In every episode of the Inside China podcast, we take a deep dive into a specific topic, combining independent reporting and exclusive interviews to provide unique insights into an emerging potential superpower. We are now featuring regular updates on the coronavirus pandemic from across the country.

Also, each week political economy journalist Finbarr Bermingham wraps up the latest developments in tariffs, diplomacy and economics from reporters and editors at the Post in the China Geopolitics podcast.

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