- Exports declined steepest decline since 2020
- Imports declined too
- Why China still needs USA, EU
Harare- China's trade surplus for June decreased due to a decline in both imports and exports, which indicates a shift in the balance of trade. This shift has significant implications for China's economy and the global economy at large.
China's trade surplus fell to US$70.62 billion in June 2023 from US497.41 billion in the same period last year. This was further below market forecasts of USD$74.80 billion, as exports dropped more than imports amid persistent weak demand from home and abroad.
The decrease in trade surplus suggests that China's demand for foreign goods was relatively higher than foreign demand for Chinese goods during this period. This shift in the balance of trade could have implications for China's economy, as it could impact the value of China's currency. A decrease in exports could lead to a decrease in demand for the currency, which could impact China's balance of payments and the value of its currency.
China's exports suffered a sharp decline of 12.4% on yearly basis to US$285.32 billion, which was the steepest drop since February 2020. Exports fell sharply to the United States of America and the European Union, major trading partners of China. Exports to the US plummeted by 23.7% and to the EU by 12.9%. Exports to ASEAN countries fell by 16.9%.
The decrease in exports was most pronounced in the sales of unwrought aluminium and products, which fell by 18.9%, grains that fell by 36.4%, and steel products that fell by 0.6%.
Similarly, imports to China declined by 6.8% on annual basis to US$214.7 billion due to deteriorating domestic demand. This decline reflects the challenges China is facing in stimulating domestic demand due to COVID-19 pandemic effects, bitter relations with the West and its indirect but known involvement in the Russia-Ukraine war.
The decline in imports could also lead to decreased economic growth and job losses. Imports decline worsened to USA, EU, South Korea and Taiwan, nations where economic tires with China is waning.
Imports to China declined by 6.8% annually to US$214.7 billion, which is worse than market expectations of a 4.0% drop and after a 4.5% drop a month earlier, marking the fourth consecutive month of falling purchases. Import figures were down from the US, the EU, Japan, ASEAN countries, South Korea, and Taiwan.
The decline in imports to China, particularly for unwrought copper and steel products, have significant implications for the global economy, China, and its relations with the West. The decline in imports signal a slowdown in China's economic growth, which would have spill over effects on other countries that rely on China as a major trading partner. This could lead to decreased demand for goods from other countries, which could negatively impact their economies.
Also, China's declining imports could also lead to a reduction in job opportunities in other countries that export goods to China. This could contribute to unemployment and economic instability in these countries.
Analysis on exports decline
The decline in exports to major trade partners, such as the US and EU, and the decline in imports from these countries, as well as from South Korea, Japan, and Taiwan, is attributed to the strained relations between China and these countries. The ongoing conflict in Ukraine, where Russia has invaded and China has expressed support for Russia's actions, has led to tensions between China and the US and EU. As a result, these countries have reduced their imports from China, which could have contributed to the decline in China's exports.
Furthermore, China's desire to invade Taiwan has also led to tensions with the US and other countries in the region. These tensions have led to a decrease in imports from China, as these countries have sought to reduce their economic dependence on China and diversify their sources of imports to starve China of capital.
The decrease in exports and imports also reflect the impact of trade barriers and tariffs imposed by the US and other countries. These trade barriers have made it more difficult for China to export its goods to these countries, and have led to a decrease in imports from these countries.
The slump in exports could also lead to a slowdown in global economic growth, exacerbating political tensions between China and its major trading partners, and leading to further economic and political fallout.
Can Africa replace the West as China’s biggest trading partner
It is unlikely that Africa can replace the EU and USA as trading partners for China in the short term, as the EU and USA are currently China's largest trading partners. While Africa has significant natural resources and potential for economic growth, it lacks the infrastructure and manufacturing capabilities that China requires for trade and investment.
While China has been increasing its trade with Africa in recent years, it still represents a relatively small share of China's overall trade. In 2020, China-Africa trade accounted for only around 4% of China's total foreign trade.
However, China has been increasing its trade and investment in Africa in recent years, and this trend is likely to continue. This could result in increased economic cooperation and growth between China and African countries, as well as opportunities for African countries to diversify their trade relationships.
If China were to significantly increase its trade with Africa, there could be potential benefits for both China and African countries. For China, increased trade with Africa could help diversify its export markets and reduce its reliance on the US and EU. For African countries, increased trade with China could provide access to new markets and investment, which could help stimulate economic growth and development.
However, there are potential risks and challenges for both China and African countries. Increased trade with China could lead to a further imbalance in trade relations, with African countries exporting primarily raw materials and importing manufactured goods from China. This could lead to a decline in local manufacturing industries and a lack of diversification in African economies.
Therefore, for a global economic balance and prowess, China needs USA and EU at every cost for its betterment.
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