Event: in US dollars, China’s exports in December increased by 20.9% year-on-year, expected to be 20%, and the previous value was 22%; China’s imports in December increased by 19.5% year-on-year, with an expected 27.8% and a previous value of 31.7%; The trade surplus was 94.46 billion US dollars, up from 71.71 billion US dollars. China’s exports increased by 29.9% year-on-year in 2021, with the previous value of 3.6%; Imports increased by 30.1% year-on-year, with the former value of – 0.6%; The trade surplus was US $676.43 billion, up from US $523.99 billion.
Core conclusion: Although the export growth rate fell slightly in December, it remained above 20% and remained resilient. Based on the cumulative two-year compound growth rate, China’s export growth to major emerging economies fell more or less, and China’s export growth to major developed countries increased; In the current month, the export growth rate of high-tech products rose sharply; In terms of reasons, external demand, price and epidemic situation still support exports. Imports fell short of expectations, reflecting weak domestic demand. The real estate boom declined, superimposed on the seasonal construction off-season, the demand for steel and other products weakened, and the import volume of related products fell. Throughout the year, the export growth rate in 2021 reached a new high in recent 10 years, and there may be a resilient decline in 2022. Pay attention to the impact of falling foreign demand, repeated epidemic, stable supply chain, stable foreign trade policy and RMB devaluation on exports.
Summary of trade data in December: export resilience is still strong, the growth rate for major developed countries is rising, and the growth rate of high-tech products is rising sharply. From the perspective of reasons, foreign demand, price and epidemic situation still support exports; Imports fell short of expectations, reflecting weak domestic demand.
In terms of exports, in US dollars, exports in December fell 1.1 percentage points to 20.9% from the previous value, and the two-year compound growth rate fell 1.8 percentage points to 19.5% from the previous value.
1. The global prosperity has declined slightly, the export growth rate has declined slightly, and the overall toughness is still strong. In December, JPMorgan’s global manufacturing PMI remained unchanged at 54.2% of the previous value. The year-on-year and two-year compound growth rate of South Korea’s exports, which is more consistent with the global economic boom, fell in the same month, which means that the global boom fell slightly and China’s export growth fell slightly.
2. By country: China’s export growth to major emerging economies fell more and rose less, while China’s export growth to major developed countries increased. Based on the cumulative two-year compound growth rate, in December, China’s export growth to ASEAN, Brazil, South Korea and Hong Kong decreased, and China’s export growth to India and Russia increased; Export growth to the United States, Europe, Japan and other developed economies increased, of which the cumulative year-on-year compound growth rate of exports to the United States rebounded by 0.8 percentage points to 17.3% compared with the previous value. From the perspective of external demand, in the above economies, except South Korea, most of the manufacturing PMI in other countries / regions fell, of which the manufacturing PMI in the United States, Europe and Japan fell by 2.4, 0.4 and 0.2 percentage points respectively to 58.7%, 58% and 54.3% compared with the previous value.
3. By product: among the main export products, the export growth rate of high-tech products has risen sharply, and the year-on-year two-year compound growth rate of the current month has rebounded by 7.2 percentage points to 24.8% compared with the previous value. The two-year compound growth rate of other textile yarns, fabrics and products, toys, electromechanical products and integrated circuits has declined compared with the previous value, but the decline range is limited, still growing at a high level of more than 10% – 20%. Although the two-year compound growth rate of automobile and automobile chassis exports decreased by 23.7 percentage points compared with the previous value, it can still be maintained at a high level of 42%.
4. Despite the slight decline in export growth in December, the resilience is still strong. The main reasons are as follows: 1) the manufacturing PMI in Europe, America and other developed countries remains at a high level of 55% – 60%, which supports the export of China’s Electromechanical, high-tech and other products; 2) Since mid and late November, Omicron has erupted, and the epidemic has repeatedly supported the export of epidemic prevention materials such as masks and testing reagents; 3) Prices still support some products. We split the unit price pull rate and quantity pull rate of the export amount of key varieties. In addition to automobiles and refined oil, the price contribution of exports of household appliances, mobile phones and steel is obvious, which forms a strong support for exports. In terms of imports, in US dollars, imports in December fell by 12.2 percentage points to 19.5% compared with the previous value, and the two-year compound growth rate fell by 4 percentage points to 13.4% compared with the previous value. The overall import growth rate was lower than expected, reflecting that domestic demand was still weak, and the import growth rate of steel and other products decreased significantly. China’s manufacturing PMI new orders and import index rebounded slightly to 49.7% and 48.2%, but still below the boom and bust line, reflecting weak domestic demand. The real estate boom declined, superimposed on the seasonal construction off-season, the demand for steel and other products weakened, and the import volume of related products fell. Based on the year-on-year compound growth rate of the current month and two years, the growth rate of import quantity of iron ore, concentrate and steel in December decreased by 15.4 and 34.6 percentage points to – 7.8% and – 17.8% respectively. In addition, the import growth rate of refined oil and fertilizer also declined significantly.
The export growth rate in 2021 reached a new high in recent 10 years, and may be a resilient decline in 2022. Pay attention to the impact of falling foreign demand, repeated epidemic, stable supply chain, stable foreign trade policy and RMB depreciation on exports.
In 2021, the year-on-year growth rate of exports was about 30%, and the two-year compound growth rate was about 16%, both reaching a new high since 2011. As described in our previous report, export performance has remained strong since 2021, mainly driven by the recovery of external demand, especially the recovery of durable goods consumption in the United States; At the same time, the recovery of overseas production is not stable, coupled with the demand for epidemic prevention materials and home and office supplies caused by the repeated epidemic, the production substitution effect is still strong. After the third quarter, the price contribution increased. Looking forward to 2022, considering the decline of overseas demand, the decline of loose policies, the recovery of supply, the possible decline of prices and other factors, the export growth rate is expected to decline, but the repeated epidemic may form a certain support for exports. We suggest to pay attention to the impact of the following variables on exports: drag items: falling external demand; Support items: repeated epidemic, stable supply chain, stable foreign trade policy and RMB devaluation. Specific concerns:
1. The decline rate of us durable goods consumption and global demand. It is estimated that the proportion of China’s exports of mechanical and electrical products will remain at 55% – 60% for a long time, and the proportion will be 59% by the end of 2021, which is the main support for China’s exports. China’s export of mechanical and electrical products is consistent with the consumption of durable goods in the United States and the PMI of global manufacturing industry. The growth rate of U.S. commodity consumption and global prosperity may decline in 2022, which is expected to drag down China’s export of mechanical and electrical products, thus dragging down the overall export growth.
2. Epidemic situation. In the previous report “Omicron’s impact on global economy and monetary policy”, we pointed out that under the impact of Omicron, China’s clearing strategy has stronger preventive and control over the spread of Omicron in China, and China has a complete industrial chain system. If the repair process of global supply chain is blocked, China’s export substitution logic is expected to be strengthened, That is, the logic of epidemic prevention materials + Home Office + export substitution + recent price support during the epidemic period may be repeated to a certain extent, so as to achieve a resilient decline. According to our estimation, textiles, clothing and furniture related to epidemic prevention materials and home office account for nearly 14% of China’s exports, which will form a certain support for exports.
3. The stability of China’s supply chain and the rising global demand for electronic products and intermediate products in the post epidemic era. We believe that even if Omicron is effectively controlled and the global supply chain and production restart the repair process, China, as an important intermediate export country, is expected to have no stall risk. Our calculation shows that the proportion of China’s exports in the world remained stable at about 12% – 13% in 2015-2019 before the epidemic, and increased to about 15% in 2020-2021 after the epidemic. In view of the integrity of China’s supply chain and the permanent rise in the demand for electronic products and intermediates in the post epidemic era of digitization, automation and remote work, China’s export share may not decline significantly.
4. Stable foreign trade policy support. Since the fourth quarter of 2021, the Chinese government has issued a number of positive policies to stabilize foreign trade, promote the development of high-end trade industries in the value chain and increase support for industrial upgrading of labor-intensive product export enterprises by reducing tax interest, reducing foreign investment access restrictions, carrying out high-level pilot projects of cross-border trade and investment, and adjusting the supply chain across cycles. In addition, the regional comprehensive economic partnership agreement (RCEP) officially entered into force on January 1, 2022, which will also open up space for China’s textile and other exports.
5. Devaluation of RMB. In 2022, the Federal Reserve will enter the interest rate increase cycle, and China’s economy is under great pressure. It is expected that China’s policy will be mainly stable, monetary policy will be stable and loose, and RMB will face depreciation pressure, which will support exports.
Risk tips
The epidemic evolution exceeded expectations, the economic recovery was less than expected, and the implementation of policies was less than expected.
