China wins trade war and exports have never been higher

The world’s second-largest economy closed 2020 with an overall trade surplus of $ 78 billion for December, according to official customs data released Thursday. China’s overall surplus for the year hit a record $ 535 billion, up 27% from 2019. Exports, meanwhile, hit a record high.

“Amid all the rumors of decoupling and de-globalization, somewhat unexpectedly, the pandemic has deepened ties between China and the rest of the world,” wrote Larry Hu, chief China economist for Macquarie Capital, in one research report.

Louis Kuijs, head of the Asian economy at Oxford Economics, attributed China’s gains largely to the country’s handling of the pandemic, which erupted in the Chinese city of Wuhan just over a short time ago. a year. He added that China has benefited from strong demand for protective equipment and electronics, as people all over the world work from home.

“After recovering from its own Covid-19 crisis, China was open for business when the pandemic sparked huge demand in the United States (and other countries) for products related to Covid-19,” Kuijs said.

China’s trade relations with the United States, meanwhile, have become even more imbalanced: Beijing’s trade surplus with Washington rose to $ 317 billion in 2020, a 7% increase from the previous year. year before and the second highest amount on record, according to Iris Pang, chief economist for Greater China at ING. The amount is only $ 7 billion from 2018 levels, when Trump launched a meteoric trade war to redress what he called an unbalanced relationship with the world’s second largest economy.

“Judging by the surge in US imports from China in 2020, it seems fair to say that Trump’s trade war with the country has failed,” Kuijs said. said.

The good trade news comes days before China announces GDP figures for the end of 2020 – another likely positive result. Analysts widely expect China’s economic growth to pick up even more in the last three months of the year. Analysts polled by Reuters expect the Chinese GDP will grow by 2.1% for the whole of 2020.

“As [China] plays a vital role in many supply chains and remains an inherently very competitive place of production, it is much easier said than done to ‘decouple’, ”said Kuijs.

China’s future is not without challenges, however. Analysts point out that President-elect Joe Biden is unlikely to reverse some of the pressure on the country after he takes office next week.

“The Biden government will take a different, less combative and more stable approach to China,” Kuijs said. “But it’s politically impossible for Biden to remove tariffs on Chinese products anytime soon.”

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