- China exporting far less to the US than in recent past, but its overall exports are up.
- What about China’s market? How are countries finding exporting there?
- We see many countries in Asia going through an upswing in their exports to China.
- Energy exporters are seeing stagnant or declining exports value, due to weak prices.
- As a counter to the US, China would likely offer greater market access to its trading partners.
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Commentary: Gauging exports to China
As China-US trade tensions re-intensify, the question of the future of trade re-surfaces. If nations have to pay the US stiff tariffs and/or invest heavily to keep trade corridors functioning, what would they do vis-à-vis the rest of the world, especially China? Would they capitulate to Washington’s demands to mirror US tariffs and other trade restrictions on China? Will they curtail their trade relations with China as a price to maintain trade with the US?
These questions are typically examined through China’s exports to the rest of the world. The short answer from this angle is that while the US shies away from China, the rest of the world remains fairly open. Through August, China’s exports to the US were down 33%yoy, but its exports to the rest of the world were up 11%yoy, resulting in continued expansion of its total exports. China’s ability to keep the non-US market remains intact, in seems.
But the less discussed angle is the world’s exports to China. Are nations finding it profitable to sell to China? Is there sufficient demand and market access? We examine that crucial angle by looking key countries’ exports track record to China.
While China is going through a soft patch in its demand cycle, it remains a major purchaser of food, energy, and industrial inputs. It may run trade surpluses with most countries in the world, but its import appetite is substantial. Commodity and industrial input exporters like Indonesia and Malaysia are seeing double digit exports growth to China. India, along with a recent thaw in its relationship with China, is experiencing a welcome rebound in exports (+22%yoy through August) as well.
Elsewhere in Asia, Taiwan, Thailan, and Vietnam are seeing an uptick in demand from China, leaving behind the stumble of 2024. Singapore’s exporters, having seen a sharp correction earlier this year, are also enjoying an uptrend in recent months. South Korea, meanwhile, has seen in exports to China flatline this year. But going with the regional trend, there is no sign of China closing its doors to Korean exporters, even if they are not seeing a big pick-up in demand, unlike many of its regional peers.
It is unsurprising that US exports to China are down sharply (-24.3%yoy), with China holding back on soybean imports, purchasing from Argentina and Brazil instead. Japan’s exports to China are on a modestly expansionary path, while EU’s have begun to recover after a prolonged period of contraction.
What about the rest of the world? Russia’s narrative is instructive. As sanctions have contracted its export market size, it has maintained access to China, which now makes up a quarter of its total exports. But whether it is Russia or other major energy exporters like Qatar, Saudi Arabia, or UAE, weak global energy prices have been weighing on their export values. Over the last couple of years, none these countries have seen any discernible pick-up in exports to China.
In terms of the importance of the Chinese market, Asean countries tend to have 10-15% to their total exports head to China. Energy exporters like Russia, Saudi Arabia, and Qatar are in the 15-25% range, as are South Korea and Taiwan. The latter two cases would be interesting to watch in the context of ever rising push coming from the US to do less with China.
China’s 1.4bn population and USD19trln GDP offer tantalising market prospects for global producers around the world. As the US pushes back on its trade potential, China will be compelled to seek greater trade with the rest. But to be able to export more elsewhere, China would need to offer greater market access to its trading partners. Nations wanting to engage with China are likely to find a more amenable exports environment in the coming years.
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