Core view
In 2022, the supply advantage boosted exports to a good start, steady growth and bulk price increases boosted imports, and the trade surplus increased significantly. Q1 is expected to drive the growth of nominal GDP by 1 percentage point. Considering the variables such as epidemic prevention and control, relaxation of restrictions and geopolitics, China's supply advantage may drive the positive growth of China's exports. It is expected that the growth rate of RMB denominated exports in the whole year will reach 8.5%.
How to understand the good start of exports in 2022?
From January to February, the growth rate of RMB denominated exports was 13.6%, compared with the previous value of 17.3%. China China has one belt, one road to the developed one, and the other one belt, one road. The export volume of China has increased by 11.1%, 21.4% and 10.6% respectively. The export to the countries along the belt and road has increased by 16.6% over the same period 1-2. What are the reasons for the good start and resilience of exports in 2022? First, China's supply advantage has laid the foundation for export resilience. Epidemic prevention and control, social restrictions, geopolitics and other factors have an impact on the pattern of supply and demand. The epidemic has gradually become influenza, epidemic prevention and control measures in various countries have been gradually removed, and the structural replenishment of reservoirs and the repair of service industries in developed economies have driven demand; Geopolitical factors such as Russia Ukraine conflict and Russia related sanctions affect global supply through direct and indirect ways. The former originates from the insufficient supply of main exports of Russia and Ukraine, while the latter is worried that the vulnerability of the global supply chain will increase significantly under the impact of a series of risk events. China's supply advantage is relatively dominant, driving the continued boom of exports.
Secondly, the gap between supply and demand pushes up export prices, which is also an important reason for the good start of exports. As of December 2021, the export price index has reached a high of 109.3. Since 2022, the prices of bulk commodities have continued to rise, and the CRB index has been reflected. Considering the leading role of the import price index in export prices, it is expected that the subsequent export price index will rise or remain high with a high probability, Continue to support nominal export growth.
Looking forward to the follow-up, we expect the growth rate of RMB denominated exports to be 8.5% in 2022, which is high in the front and low in the back. On the demand side, according to Bloomberg's prediction, the economic growth rhythm of major developed economies such as the United States and Europe is high before and low after. The expectation of high inflation and liquidity tightening have exacerbated the expectation of future recession to a certain extent, and overseas demand is expected to weaken quarter by quarter. On the supply side, we believe that China's supply advantage is prominent. On the one hand, geopolitical risks, economic sanctions and other uncertain events have exacerbated the vulnerability of the global supply chain, and China's supply advantage is prominent; On the other hand, the slow repair of overseas labor market and the normalization of enterprise balance sheet may encounter more challenges. There are hidden worries about the release of overseas production capacity. The rise in the prices of commodities, sea freight, labor and other factors has a great impact on overseas enterprises. There is also a significant gap in the policy response space of overseas economies compared with China. The tightening of overseas supply and demand may cause the export price index to remain at a high level and boost the nominal export growth. Overall, we expect the annual RMB export to reach 8.5%.
Steady growth combined with rising commodity prices, and the import growth rate remained high at the beginning of 2022
From January to February, RMB denominated imports increased by 12.9% year-on-year, with the previous value of 16%. In China, one belt, one road, was imported from ASEAN and the other countries along the same trade target, which increased by 10.3% and 20.7% respectively, and the growth rate from EU and US was only -2% and 5.8% respectively in 1-2 months. In terms of trade goods, the import volume of iron ore was basically flat and the price fell, the import volume of crude oil, coal and natural gas decreased, and the import volume and price of soybeans and refined oil increased simultaneously.
Steady growth combined with rising commodity prices, and the import growth rate remained high at the beginning of 2022. After the central economic work conference established the tone of steady growth in December 2021, the policies and policy effects were gradually implemented, and the PMI was above 50 for two consecutive months. We expect a high probability of a good start for the economy in the first quarter, and the actual GDP will reach 5.7%, significantly rising compared with Q4 in 2021, which will help maintain the resilience of import growth. In addition, the import price index has a strong pull on imports. The CRB index is highly correlated with the import price index. Since the beginning of the year, fundamentals, financial factors and risk avoidance expectations have led to a sharp rise in bulk commodities, especially in the oil and gas field. China's imports are mainly in energy, non-ferrous metals, Shenzhen Agricultural Products Group Co.Ltd(000061) and other fields. The rise in bulk commodity prices has pushed up the import price index.
Looking forward to the follow-up, China's steady growth superimposed on bulk prices remains high. We expect the annual growth rate of RMB denominated imports to reach 9.2%. The government work report defines the tone of steady growth in 2022 and requires that policies related to steady growth should be introduced in advance. Considering the low base in the second half of 2021, we maintain the previous view put forward in November 2021 that "the real GDP growth rate in 2022 is 5.6%, the economic rhythm presents a Nike trend, and the real GDP growth rates from Q1 to Q4 are 5.7%, 4.8%, 5.7% and 6.2% respectively", Steady growth will help expand domestic demand and boost imports. In addition, we expect that the global pattern of commodity supply and demand will be difficult to reverse significantly in the short term. If the subsequent risk aversion and financial factors cool down, the commodity price may fall appropriately, but the tight balance between supply and demand determines that its price probability remains high. Considering the logic of China's steady growth superimposed on the high level of bulk commodities, we expect the annual growth rate of RMB denominated imports to reach 9.2%.
Pay attention to the conflict between Russia and Ukraine and the potential impact of sanctions against Russia
Pay attention to the potential foreign trade worries caused by the conflict between Russia and Ukraine and the sanctions against Russia. Since late February, the conflict between Russia and Ukraine has gradually intensified, and developed economies such as the United States and Europe have also carried out targeted economic sanctions against Russia, and gradually stepped up and expanded the encirclement. We have detailed tracking and analysis in the recently issued series of reports on the conflict in Ukraine. We suggest that we pay high attention to the potential foreign trade worries caused by the conflict between Russia and Ukraine and the sanctions against Russia:
1) Russia is an important exporter of global energy, non-ferrous metals, agriculture and other major commodities. According to the HS classification and the supply distribution of major commodities, Russia accounts for a large share of global exports in the fields of fossil fuels, wood products, transportation equipment, nickel products and grains, as well as crude oil, natural gas, palladium, nickel, tungsten ore, wheat An important exporter of barley and other commodity categories. Sanctions against Russia may directly affect the global export supply of the above categories. On the one hand, they aggravate the imbalance between supply and demand and push up prices. On the other hand, they may lead to the disturbance of the capacity release of relevant industrial chains, which may lead to periodic setbacks in supply and affect the trend of China's foreign trade.
2) geopolitical, ideological and other risk factors may impact the global supply chain and enhance vulnerability. The impact of the epidemic has had a major impact on the supply chains of various countries, making the developed economies regard enhancing the toughness and flexibility of the supply chain as an important industrial development direction. In 2022, geopolitical risks, ideological conflicts and other factors such as the conflict between Russia and Ukraine will ferment again, increasing the vulnerability of the global supply chain. China's supply will take advantage, but if the conflict between the United States, Europe and Russia escalates, The global supply chain system is becoming ideological, and China's foreign trade may be impacted to some extent.
3) pay attention to the impact of stagflation risk on China's foreign trade. The conflict between Russia and Ukraine and the sanctions measures have led to the periodic sharp rise of bulk commodities, and the expectation of stagflation around the world has increased. We believe that if the stagflation trend is gradually realized, considering that China's import structure is dominated by energy products, non-ferrous metals and Shenzhen Agricultural Products Group Co.Ltd(000061) may significantly raise China's import price index, and considering that there are relatively few permanent substitutes in China's export field, The weakening of overseas demand makes it difficult for the export department to effectively transform the upward pressure on the cost side, and the field of foreign trade may bear a great impact.
In 2022, the trade surplus made a good start. Q1 may drive the growth rate of nominal GDP by 1 percentage point
From January to February, the trade surplus achieved high growth. From January to February 2022, the trade surplus was USD 115.96 billion, continuing the high level of Q4 overall surplus. Among them, China's trade surplus with the United States and the European Union was large. From January to February, it reached USD 59.8 billion and 45.6 billion respectively, totaling more than 100 billion, higher than the highest level of Q4 in 2021. In addition, China's trade surplus with ASEAN reached US $16.053 billion, higher than the level in December 2021. On the whole, the larger than expected trade surplus will bring toughness to China's economic growth. We expect that the scale of Q1 trade surplus in 2022 is expected to reach more than 140 billion US dollars, which will boost the nominal GDP by nearly 1 percentage point.
Risk tip: Sino US trade frictions have worsened beyond expectations, the epidemic has mutated beyond expectations, impacting the global economy, and global fiscal and monetary policies have tightened beyond expectations
