Expectations were high regarding how Xi Jinping would tackle China's economic challenges. Our initial impression, pending further information from the closed-door meeting, is that Xi's China will continue to address every issue, regardless of its size, from the perspective of national security. It appears that empowering market forces is a thing of the past. Despite promises, we believe the market will take a backseat.
The labyrinthine rhetoric suggests further unilateral opening, but only to the least-developed countries. For the most advanced countries, the vague and ambiguous "well-paced manner" is a clear sign of postponement. This indicates China’s need to buy time until 2029, when Xi Jinping will be in a fourth term or, perhaps, a new leader will have the top job, dealing with the outcomes of decisions planned five years earlier.
Trade-wise, with Xi having been in power for over a decade, the dreams from ten years ago about EU exports to China now look like just that—a dream
Ursula von der Leyen Re-elected European Commission President by Ample Majority
EU trade and trade policy were not mentioned explicitly but were implicit in almost every point emphasized by the re-elected president. To some extent, it was not necessary to mention it, as EU trade policy is an exclusive EU competence; it is the EU that legislates on trade matters. Full VDL speech.
EU Member States' Export Performance to China
EU: Imports from China Down 10%, Exports Down 3%
China’s Anti-Dumping Probe on EU Pork: The Three Companies Selected for Sampling
Litera (Spain) literameat.eu
Danish Crown (Denmark) danishcrown.com
Vion Boxtel (Netherlands) vionfoodgroup.com
WTO Unable to Quantify China's Subsidies; Reform Stalled
The WTO states in its regular review of China's trade policy that it is unable to calculate the size of China's subsidies in the areas of aluminium, electric vehicles, solar modules, glass, shipbuilding, semiconductors, and steel.
Materials made available to the Secretariat for this review provide only limited information, - the WTO says.
Estimates within the review place China's subsidies at up to $900 billion.
The WTO also claims that China's reforms have come to a halt.
China's Probe into French Cognac Industry Continues
The Trade Remedy Investigation Bureau of the Ministry of Commerce celebrated its hearing on July 18 with the French companies investigated for dumping practices in the category of brandy (i.e., cognac).
The investigation, requested by the China Alcoholic Drinks Association, claims that import prices dropped by approximately 16%. However, a cursory look into China Customs data does not show such a drop, at least not in the average price of batches shipped. If anything, the French CIF price of cognac had a compound annual growth rate of around 10%.
SAIC's First European Plant May Be Located in Spain (Chances for Hungary or Czech Republic Too)
Chinese blogosphere says SAIC is currently negotiating with the Spain Ministry of Industry to consider building an electric vehicle factory in the country to produce its MG cars. SAIC Motor will make a decision by September 30. The new plant would be its first electric vehicle plant in Europe, and plans to produce its first vehicle in the fourth quarter of 2027.
EU Imports of E-cars from China Drop 8% by Value
Subject to further verification, we believe the drop in value is due to cars imported between January and May 2024 having an average price per car that is 12% lower than during the same period in 2023. Our estimate is that the number of units imported increased by 5%.
EU Member States Vote on EU's Tariffs on E-Cars from China
The member states of the European Union are casting votes regarding the EU's tariffs on electric cars that are imported from China. The European Commission will not disclose the outcome since it is a non-binding advisory vote.
If the final decision later in the year is to push for tariffs, a binding vote among member states will be required. To block the initiative, a majority of 15 countries representing 65% of the EU population is necessary.
Arthur Leichthammer, Policy Fellow for Geoeconomicas at the Jacques Delors Centre, reports the cast vote of EU Member States:
In favour: France, Italy, Netherlands, Spain, Belgium, Bulgaria, Denmark, Latvia, Lithuania, Poland
Against: Hungary, Slovakia, Cyprus, Malta
Abstain: Germany, Sweden, Austria, Croatia, Estonia, Finland, Ireland, Lux, Portugal, Romania, Slovenia
Unknown: Greece, Czech Republic
In the meantime, CCCEU, the Chinese lobby in Brussels, stresses that only 10 of the 27 members of the European Union voted to support provisional tariffs on electric vehicles.
In H1 2024, China’s Imports from the EU (Excluding the Netherlands) Drop 7%
ASML's semiconductor machinery increased the Dutch share of EU exports to China by two percentage points over the past two years.
The increase in Dutch exports of semiconductor machinery by ASML, used to print circuits onto wafers, drew the attention of the Biden administration, which plans additional restrictions on the exports of such machinery. A large chunk of the IP embedded in ASML machinery seems to belong to the US.
US$ vs CN¥ Exchange Rate
Ballpark figures show that the USD has strengthened by 3% against the tightly controlled yuan since pre-COVID
Consumption in China Grows at a Rate Well Below GDP Growth
In nominal terms, the growth over the last four years is 3.6%
China's Customs Trade Surplus versus Balance-of-Payments Surplus
Zhang Ming from the Institute of Finance and Banking writes a piece trying to answer the conundrum of why the gap between China's customs trade surplus and balance-of-payments surplus has widened significantly.
Zhang considers two plausible reasons:
Differences in statistical principles between the way goods trade is computed at the BoP and at Customs.
Under a strong USD, Chinese export companies keep more of their export revenue abroad.
He also considers a lower probability for three other possible reasons:
Errors and omitted items in China’s balance of payments have increased, resulting in China's current account surplus and goods trade surplus being lower than their true levels.
Delayed payments from sanctioned Russia lacking USD.
False exports and fraudulent export tax rebates.
Zhang Ming ponders further, splitting the analysis into imports and exports and offering some explanations that are not conclusive.
Chinese Exports' Growth to Russia Loses Steam
Collecting payments is one of the reasons. Chinese banks are afraid of sanctions.
Chinese Media Celebrates China’s Total Trade in H1 2024 as a New High, Though Still Below H1 2022 Levels
China’s Dual Circulation Strategy: Beyond the Rhetoric, It's All About Increasing Surplus
The economic policy of dual circulation was introduced in 2020 by China's Politburo and refined by Xi Jinping to prioritize "internal circulation." The language used to explain the concept was so confusing that media and scholars at the time wrote labyrinthine pieces attempting to reconcile contradictory interpretations. In reality, this strategy, once stripped of rhetorical debris, means only one thing:
China’s focus on growing exports far more than imports.
China Exports 7 Euros for Every 4 Euros Imported from EU Over Past Five Years
China Narrowing Deficit with Brazil Due to Surge in Electric Car Exports
China's exports to Brazil are growing in double digits (24.3%), while imports are growing in single digits (8.3%).
A typical move by China: importing commodities from its partner while flooding the market with value-added manufactured goods.