After the Two Sessions of 2024, China Sticks to Its Trade Playbook: Surplus Is What Matters
Issue 136, Monday 11th March 2024
EU Considering Retroactive Tariffs on Chinese EVs
The European Commission plans to begin customs registration for imports of Chinese electric vehicles on March 8, 2024. These vehicles may face retroactive tariffs from that date if the EU's trade investigation in the future determines that they are benefiting from unfair subsidies.
Li's Many Musts
In his speech, Premier Li conveyed a sense of urgency, with numerous imperative statements. We counted a dozen and a half. We highlight one that appears to be made with emotion.
we must be more confident and more assured of ourselves
Others are part of the rhetoric at large. As for trade, Li´s speech distills the usual playbook.
To reduce import tariffs on items that China requires, such as advanced technology equipment and minerals.
Increase subsidies for exports: “We will use special funds for the
development of foreign trade to facilitate trade in services, digital trade, and
cross border e commerce export.”
China's Domestic Market Absorbs Only 2/3 of Its Li-ion Battery Output
Overcapacity is in the offing, something not unusual in China Inc. According to figures from the Ministry of Industry, its domestic market only absorbs two-thirds of China's total Li-ion battery output.
The EU-27 absorbs 36% of China's Li-ion battery exports, equivalent to 12% of China's total output
Li-ion batteries are the third most exported individual product by value in 2023 ($65 billion). They occupied the 17th spot just before the pandemic, experiencing a fivefold growth in exports since 2019.
In a totum revolutum, the hodgepodge of private and state-owned enterprises participate in the flood of subsidies up and down the e-car supply chain.
In the meantime, a price war among e-car manufacturers in China unfolds at high speed while BYD e-car sales in the first two months of 2024 plummet to levels of two years ago.
Both the EU-27 and the UK have intentions to evaluate the scale of subsidies in China's electric car industry
China's Trade With Russia Up 10%
In January and February 2024, China increased its exports to Russia by 12%, while imports from the Russian Federation grew by 8%
China's Goods Surplus: Nearly $900 billion in 12 Months
China's Usual Playbook: If Trade Goes Down, Surplus Must Still Go Up
The EU, the U.S., and the UK supply 76% of China's surplus.
Surplus is what matters for China. See, for example, the linear trend of its trade with the European Union over the last five years
Buying Time: Keeping the Surplus with Some, While Fixing the Deficit with the Rest
See 2023 on the graph
China's 2024 Grain Stockpile Budget Matches 12 Months of Cereal Imports
It represents an 8% increase over the amount budgeted in 2023. Source
Despite being the second-largest producer worldwide of corn, with approximately 274 million tons, China still needs to import an additional 10%, or 27 million tons.
Chinese Outbound Travel is Back. For Visitors? Not Yet
With January 2024 data in hand. Source SAFE.
China's AI: Revisiting Expectations from 2017
In July 2017, the State Council released an AI roadmap. It covered three phases: up to 2020, 2021-2025, and up to 2030. So far, one would say that China was caught completely by surprise with the rapid rise and popularity of LLMs trained by prompts.
We re-read the roadmap, and China has barely one year left to meet some of the goals posted in 2017, namely,
“by 2025, a major breakthrough will be achieved.”
The roadmap published about seven years ago wasn't shy at all. It claimed that for major affairs like AI, there were advantages in China's socialist system. We doubt the Chinese planners would be that bold now.
As a matter of fact, on March 6, Zeng Yi, Director of China Electronics Corporation—a state-owned company, which takes cyberspace security and informatization as its core business—stated that
“Objectively speaking, despite the great efforts we have been making, our difference [with the US] is still huge,”
Ores and Lithium
Boosted by the gargantuan demand for mineral ores and lithium, China's deficit with Chile has increased fourfold since 2015, now representing the equivalent of 7% of Chile's GDP. This underscores China's dependence on Chilean resources but also highlights its leverage
Lithium Prices Paid for Imports from Chile by EU and China
Chile supplies 87% of China's lithium imports and 70% of the EU's lithium imports.
China pays 42% more per ton of lithium carbonates than the EU does. While the EU imports lithium (from Chile) at CIF $29,224/ton, China pays CIF $41,671/ton.
If any reader can help us to explain why, we would appreciate it.
The Somewhat Misleading Durians and Cherries: A Closer Look at China's Fruit Imports
Excluding just these two fruits, China's imports of edible fruits aren't growing; on the contrary, they're decreasing (-4%). Both fruits combined represent a whopping 50% of China's imports by value
That's all folks, see you next week!
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