The China Analyst

China Trade Roundup illustrates recent trends in China’s trade performance and the outlook going forward with a summary of the latest trade data, and analyses China’s import and export totals by product category. By Charles Avery and Jim Hu

China’s trade performance and outlook

At the end of H1 2010, it seems as if China is on track to exceed its record export totals of 2008, a year which witnessed China sending an immense USD 1.4 trillion worth of goods overseas. By the end of the first six months of 2010, China’s export totals had reached USD 705 billion. Given the seasonal downturn during February for the Chinese New Year, and the fact that the peak months for trade—August through September—are just beginning, China appears destined to exceed the mark set two years before. June’s exports of USD 137 billion were above that of any month during 2008. Combined imports and exports for China through June equaled USD 1.35 trillion; this six month total is greater than that achieved during the first eight months of 2009.

A comparatively slow year for trade, 2009 has magnified the potentially-record breaking totals of 2010. Exports were up 86% y-o-y this January, as international trade was nearly at a standstill the year before in the midst of the global recession. In June 2010, exports and imports were up 43.9% and 34.1%, respectively. These y-o-y monthly increases may diminish to around 20% in H2 2010, a level more typical of China’s trade activity in recent years, due to the resumption of more normalised import and export totals during July to December the year before.

China’s general trade—the exchange of finished goods—comprised the greatest share of its shipments to and from overseas partners. Second to this was processing trade with imported material at 31.5% of total trade, with China more often the processor of imported material rather than the recipient of processed material.

Recent export / import levels

In H1 2010, trade was up between China and its major trade partners, and China’s total imports for H1 2010 reached USD 649.49 billion. The US was still China’s largest trade partner, although when considered as a whole, the EU tops the US for both imports and exports.

Comparing H1 2010 with H1 2009 shows a rebound in flows of goods and services between China and its top trade partners. An additional USD 90 billion changed hands in H1 2010 compared to the previous year, with exports to the EU jumping by USD 37 billion. The second-largest increase in Chinese exports was to the US, the value of which exceeded USD 27 billion.

Of China’s major trade partners, the most substantial changes in both imports and exports occurred with the member countries of ASEAN. China’s imports from ASEAN increased by 64% y-o-y in the first half of the year. Although exports to ASEAN rose by 45% for the same six month period, the shift was enough to move China’s trade balance with ASEAN to a net deficit. This movement coincides with the China-ASEAN Free Trade Agreement entering full force on January 1 this year. Hence China now runs a trade deficit with ASEAN, Japan, and South Korea, and a surplus with its other seven major partners.

Most of China’s international trade involves mechanical and high tech products. Total trade in these two categories of goods reached USD 1,126 billion through June this year, up 40.9% from the USD 799 billion total for H1 2009. China’s major export categories all experienced double digit increases during the first half of the year on a y-o-y basis. The largest such increase was for steel products, up 83%, at a total value of USD 18.7 billion for H1 2010.

The most prominent changes to China’s imports on a y-o-y basis involved crude oil. The value of crude oil imported rose an astonishing 113% in H1 2010 compared to the same period in 2009. This is partially attributable to a higher oil price and to China’s booming domestic market for automobiles. In the first half the year, Chinese imports of motor vehicles (and their chassis) nearly tripled on a y-o-y basis. With the exception of steel imports, the most impressive import gains were to be found in mineral-based imports. The value of iron ore imports increased 53%, petroleum 45%, and copper products 70%.