China trade: shipments hit ground running in 2024, but hunt is on for new export stalwarts

China’s exports rose 7.1 per cent in January and February compared to a year earlier, while imports went up 3.5 per cent, both well in excess of projections
Country is relying on high-demand exports to fuel growth and fulfil targets, with premier vowing to bolster trade in his government work report

China trade

Mia Nulimaimaiti

Published: 11:12am, 7 Mar 2024

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China needs more durable export commodities – cut from the same cloth as its innovations in new energy – to hedge against geopolitical pressures and sustain growth in 2024, analysts said, even with shipments beating market expectations in the first two months and a record trade balance on the books.

Exports rose by 7.1 per cent from a year earlier to US$528 billion in combined figures for January and February, and imports increased by 3.5 per cent according to customs data released on Thursday.

Both readings surpassed market forecasts by a wide margin, thanks in part to a low base in the same period last year – a time when the country was shaking off the lingering effects of pandemic controls.

“China’s commodities imports are particularly strong, a sign that domestic demand is not showing a significant downturn,” said Ding Shuang, chief Greater China economist at Standard Chartered Bank.

“Net exports, which previously had a negative contribution to gross domestic product (GDP), are expected to reach around zero this year, and exports will at least no longer drag down economic growth in 2024,” Ding said.

China has been grappling with a number of thorny economic issues, including a property market downturn, mounting local government debts, deflationary risks and geopolitical tensions, collectively eroding confidence among overseas investors and the domestic private sector.

02:40

Chinese Premier Li Qiang delivers his first work report amid concerns about state of the economy

Yet the rapid growth fuelled by China’s “new three” – electric vehicles (EVs), lithium-ion batteries and solar panels, all marquee products for the global energy transition – is one source of optimism that these headwinds can be offset.

At a high-level economic press conference, held on Wednesday during the “two sessions” political meetings in Beijing, Minister of Commerce Wang Wentao said the “new three”, which together saw export growth of around 30 per cent, will steadily expand China’s overseas footprint.

“As our export commodities are climbing up the value chain, coupled with China’s proactive opening up and the expansion of import market opportunities, China has great potential both in import and export,” Wang said.

China needs more than the ‘new three’ … The figure could be five, seven or even more

Ding Shuang

The minister added exports in the coming month may experience setbacks due to a comparatively higher base, but the overall trend remains on an upward slope.

“Whether China can maintain this strong export recovery will hinge on various factors, which include the global slowdown and recent trade frictions targeting China’s new energy vehicles,” said Ding of Standard Chartered, adding that a potential soft landing for the world economy also offers some favourable prospects for China’s trade outlook.

According to Ding, China now needs to cultivate more high-demand export goods to mitigate trade friction from the West.

“China needs more than the ‘new three’,” he said. “The figure could be five, seven or even more. The essence is to be less of a target for Washington by diversifying its product ranges.”

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The need for reliable export goods in the same vein as the “new three” is even more acute this year, as their long-term growth prospects may be in doubt after an anti-subsidy investigation has been launched into China’s EVs by the European Union, and the United States has argued EV imports from China present a national security risk.

“To achieve this goal,” Ding said, “Beijing should consider how to create a business environment that can trigger the entrepreneurship and innovation of the private sector, which contributes two-thirds of the nation’s exports and [serves as a] buffer against trade frictions.”

Geographically, the export statistics were all on a positive trend compared to the previous year, with decreases or lower increases in some countries and regions made up for by spikes in others.

In the first two months of 2024, China’s exports to the United States increased by 5 per cent year on year, a rapid jump compared to the more than 20 per cent tumble for the same period in 2023.

Exports to Russia rose 12.5 per cent year on year in January and February, building on the robust growth of 19.8 per cent seen in the same period last year.

China’s trade with its northern neighbour soared rapidly after the Ukraine war, but it is unclear whether such growth will stay steady.

Shipments to the Association of Southeast Asian Nations – China’s largest trading partner – rose by 6 per cent.

Its exports to the European Union decreased by 1.3 per cent, narrowing from a sharp decrease of 12.2 per cent in the first two months of 2023.

China’s total trade surplus stood at US$125.1 billion in the first two months of the year, compared with US$116.9 billion during the same period last year – the highest level ever recorded in the two-month window.

China’s trade figures for January and February are combined to smooth out the impact of the Lunar New Year holiday, which falls at different times during the two months in different years.

“China’s exports have benefited from the global tech cycle recovery and lower destock pressure, which aligns with other tech-savvy markets like Korea,” said Gary Ng, a senior economist with Natixis Corporate and Investment Banking.

“However, concern remains on the weak imports, illustrating the still challenging conditions in domestic demand. After a year of decline, China’s exports and imports are likely to rebound by 4 per cent and 3.2 per cent in 2024.”