Cargo ships unload containers at the foreign trade container terminal of Qingdao Port in Qingdao, Shandong province, eastern China, November 11, 2021.
Yu Fangping | Costfoto | Barcroft Media | beautiful pictures
China’s trade surplus has risen to historic highs during the pandemic as people consume more goods than before, but analysts say the Russia-Ukraine war will change that.
The Asian manufacturing giant’s trade surplus could narrow to $238 billion this year – about 35% of the historic $676 billion it hit last year, according to estimates by ANZ Research. calculated from ANZ Research.
“The war in Ukraine will soon begin to weigh on net trade due to falling foreign demand and import bills,” said Julian Evans-Pritchard, senior China economist at research firm Capital Economics. higher”.
Growth shock in China’s major trading partners
War could cause a broader slowdown in the global economyespecially in Europe, said ANZ Research senior China economist, Betty Wang.
The European Union is China’s second largest trading partner, accounting for about 15% of the Asian nation’s total exports. According to ANZ Research, exports to the EU jumped last year, accounting for 16% of China’s 30% total export growth.
“Statistically, the EU’s economic growth is highly correlated with China’s total export growth,” said Mr. Wang, adding that for every 1 percentage point decrease in GDP growth of the EU. EU, China’s total export growth will decrease by 0.3 percentage points.
Massive chip disruption, nickel worries
Semiconductor shortages are already severe, but Russia’s war in Ukraine is likely to further disrupt supply chains.
ANZ Research says the conflict has exacerbated a global chip shortage, on which China relies heavily on its electronics exports. Exports of electronic items contribute 17.1 percentage points to China’s 30% export growth in 2021, the research firm said.
Analysts note that both Ukraine and Russia play important roles in the global semiconductor supply chain.
Ukraine supplies pure noble gases such as neon and krypton, both essential for semiconductor production, according to ANZ. It also produces precious metals used to make chips, smartphones and electric vehicles.
According to TS Lombard’s report, China is among the emerging markets vulnerable to war-induced shortages of goods. China in particular is very sensitive to nickel supply disruptions, the report said.
Last week, the London Metal Exchange halted nickel trading after prices more than doubled over fears of supply disruptions due to the war. Russia is the world’s third largest nickel producer.
Nickel is a key material in electric vehicle batteries, and China is the largest EV producer globally. The number of electric vehicles the country exports to other countries increased 2.6 times to nearly 500,000 last year – more than any other country in the world, Nikkei reported last week.
Chinese-made electric vehicles account for about 44% of electric vehicles produced between 2010 and 2020. one study found.
Energy prices soar
The Ukraine crisis has also led to volatile oil prices, which spiked to record highs last week before falling more than 20%. That is set to hit China, the world’s largest oil importer.
China imported $423 billion worth of energy products last year, said Singapore DBS economists Nathan Chow and Samuel Tse. Of which, $253 billion is crude oil.
The economists write that China’s nominal GDP will be cut by 0.8% if the average oil price rises from $71 a barrel to $110 this year.
Oil prices have been volatile, falling below $100 a barrel earlier this week after surging to highs of more than $130 last week. On Thursday, they peaked at $100 again, well above the $70 to $80 range in crude oil traded at the start of the year.
However, China may find relief if it relies on Russia.
“With its neutrality on Russia sanctions, China could partially offset higher energy prices with cheaper imports from Russia,” the DBS economists wrote.
