On April 12, the General Administration of Customs released the import and export data for March 2024. Fortunately, this data was released after the close of A-shares, and if it is released intraday, it may cause the three major stock indexes to fall even more. Of course, the "smart money" may receive the news in advance and retreat early, causing the A-share market to weaken in the afternoon.
In the first two months of this year, China's foreign trade made a good "good start," with the total value of imports and exports in US dollar terms of $930.9 billion, up 5.5 percent year-on-year, the total value of exports reaching $528 billion, up 7.4 percent year-on-year, and the total value of imports reaching $402.9 billion, up 3.1 percent year-on-year. The export volume is the most eye-catching.
The situation reversed in March, with the total value of imports and exports in US dollar terms at US$500.8 billion, up 5.1 percent year-on-year, and the total export value fell even more, with US$279.7 billion down 7.5 percent from the same period last year, compared with the previous market expectation of a year-on-year decline of only 1.9 percent in March, and the actual decline was four times the forecast.
The decline in exports in March is not surprising, because we are focusing on the year-on-year data, comparing the export volume in March this year with that of March last year, and the foreign trade data in March 2023 is very bright due to the superposition of various factors, and the high base effect is bound to affect the data in March 2024. Therefore, when the General Administration of Customs has not released foreign trade data, the market has a forecast that the import and export data in March, especially the export data, is lower than the same period last year, but I didn't expect it to be a little too much.
What is the reason why China's export data for March is far less than expected? Some people say that it is the exchange rate, but this obviously does not make sense, because what we are observing is the data "denominated in US dollars," not the "denominated in yuan" data, and there is no situation in which the exchange rate is interfered with during currency conversion. To understand the reason, we have to start with the foreign trade data itself, let's take a look at the changes in China's export data with the five major trading partners in January-March and January-February 2024.
China's top five trading partners are ASEAN, the European Union, the United States, Japan, and South Korea. It should be noted that there are 10 ASEAN countries and 27 EU countries, and the United States is the largest trading country on the mainland by country, and its total import and export volume is higher than that of Japan and South Korea, which are in second place, and South Korea, which is in third place.
From January to February 2024, China's cumulative exports to ASEAN, the European Union, the United States, Japan, and South Korea increased by 6%, 1.3%, 5%, 9.7%, and 9.9% respectively compared with 2023.
From January to March 2024, the cumulative value of exports to these five countries or regions increased by 4.1%, decreased by 5.7%, decreased by 1.3%, decreased by 8.7%, and decreased by 9.3%, respectively.
Comparing the export data for the previous two months with the previous three months reveals the key issue in the evolution of exports to the EU and the US.
Exports to the United States in January and February increased by 5% year-on-year, and in January and March, it fell by 1.3%, a difference of 6.3 percentage points, which means that the export volume to the United States in March not only wiped out all the increase in January and February, but also "owed" some. The situation is similar in the European Union, which fell by 1.3% in January-February, and suddenly widened to 5.7% in January-March, an increase of 4.4 percentage points.
Relatively speaking, the cumulative decline in exports to ASEAN has been relatively small, at only 1.9 percentage points, while the decline in exports to Japan and South Korea has narrowed, indicating that China's exports to these two countries have stabilized and rebounded in March this year.
The conclusion is already obvious, the reason why the export data in March was far less than expected was mainly affected by the sharp year-on-year decline in exports to the European Union and the United States, among which the negative effect of exports to the United States was more obvious. In fact, in the first two months of this year, the mainland's exports were able to achieve a "good start" thanks to the recovery of export trade with the United States, and returned to last year's situation in March.
In this way, the United States has played a very crucial role in the mainland's foreign trade? Although I don't want to admit it, it is true, and the data has already shown it.
Recently, the United States has been promoting China's overcapacity, and the important task of Treasury Secretary Yellen's visit to China is to discuss with the mainland about overcapacity in emerging industries such as new energy vehicles, lithium batteries, and clean energy, and the proportion of China's total exports is increasing rapidly. This means that once the United States further increases trade protection measures on the grounds of overcapacity, curbs the export momentum of the "new three", and intensifies the "decoupling and chain breaking", it will have a more serious adverse impact on the mainland's future exports.
How can China break the deadlock? I think we can exert efforts in the following two areas at the same time.
The first is to minimize the impact of "decoupling and chain breaking" through diplomatic mediation. Both Yellen and Biden have repeatedly mentioned that they will not completely decouple from China, which is not casual remark but for the sake of the United States' own interests. The United States is a diverse country, not monolithic internally, and all parties have different interests. We need to make good use of this, unite all forces that can be united, and use the "pro-China" faction of the US authorities to reduce the impact of trade protection and "decoupling and chain breaking".
Second, we need to complete the transformation of an inward-looking economy as soon as possible. If our domestic demand rises, we can not only boost the economy, but also avoid the impact of geopolitics, and truly "do not ask for people". In the future, more policies and measures should be introduced to promote consumption, so that domestic demand can become a new driving force for economic development, and gradually reduce the proportion of net exports in GDP.