China Buys Time: Increases Surplus Contribution from EU/US Blocs by Importing Less, While Struggling to Boost Exports Elsewhere
Issue 141, Monday 15th April 2024
EU Trade Breakdown Post-Brexit
China Buys Time: Increases Surplus Contribution from EU/US Blocs by Importing Less, While Struggling to Boost Exports Elsewhere
Highlights China Trade Q1
China's trade surplus contribution from the EU-USA bloc combined increases
China's trade with the EU-USA bloc increases as a percentage of China's total trade in Q1
China's imports from the EU-USA bloc decrease as a percentage of total imports to China
China's exports to the EU-USA bloc remain the same as a percentage of total exports from China
China's Trade Surplus Drops 11% in Q1 2024
Surplus dropped to $183 billion in Q1 2024 from $205 billion a year earlier. Over the past twelve months, China's international trade in goods has yielded an average daily surplus of $2.3 billion
Trade Settlement Between Russia and China Conducted in Russian Rubles and Chinese Yuan
EU Probe into Chinese Wind Turbines
On April 9, EU Commissioner for Competition Margarethe Vestager announced that the EU will use its Foreign Subsidies Regulation (FSR) policy tool to launch an inquiry into Chinese manufacturers of wind turbines.
The subject is broadly covered in mainstream media, which, along with Madame Vestager, referred to turbine producers. We also wanted to know the export breakdown of wind blades when exported separately.
The China Chamber of Commerce to the EU, a Chinese lobby based in Brussels, accused the EU of protectionism in a note
Brandy Hangover
Minister of Commerce Wang Wentao said on April 9 that China's anti-dumping investigation into brandy imported from the European Union does not target any specific EU member state.
We apologize, but we couldn't help but laugh in disbelief. Furthermore, the probe mentions cognac which is a variety of brandy named after the commune of Cognac, in France. The name is an AOC, a label that can only be used by producers employing specific methods and located in the terroir.
Integrated Circuits: Geopolitics at a Glance
Half of China's integrated circuit needs are supplied by Taiwan.
Half of Taiwan's exports worldwide of integrated circuits go to China
Two-thirds of Taiwan's total exports to China are integrated circuits
More than one-third (38%) of Taiwan's total exports worldwide consist of integrated circuits
China Keeps M2 at Bay
One of the things from the latest 5-Year Plan that is on track.
With investors losing hope for interest rate cuts by the U.S. Fed anytime soon, we wonder if China can keep the M2 at bay. Perhaps Madame Yellen told the Chinese leadership something we do not know.
Trade Fragmentation, Re-configuration of Global Value Chains
Aimed at a conference to be held in Basel in late April, the IMF publishes a call for papers. The IMF claims that after decades of increasing global economic integration, the world economy is facing fragmentation risks.
Two of the relevant topics that authors are expected to address are
Trade fragmentation and the re-configuration of global value chains
The impact of the Chinese business and financial cycle on the global economy
Chinese Scholars' Crush: Friedrich List
We hold the view that for Chinese scholars, Friedrich List and his concept of kicking away the ladder is as beloved as Taylor Swift is among Chinese citizens
In a nutshell, Friedrich List's concept of kicking away the ladder refers to the idea that developed countries often advocate for free trade and open markets once they have achieved economic dominance, but they used protectionist policies and state intervention themselves during their own development.
If we recall correctly, List was referring to England and the British Empire, and Chinese scholars are adapting it to modern times.
The Gallium Thing
On July 3, 2023, China’s Ministry of Commerce announced that it would impose restrictions on the export of gallium for reasons of national security. The measures were put in place as of August.
Nearly 90% of China's gallium exports by value are in the form of a chemical compound wafer doped for electronics. We looked into its exports following the announcement in early summer 2023.
By volume, exports in January and February 2024 dropped by 22% compared to a year earlier. Notably, the FOB export price in February was 50% higher than in the same month of 2023.
In the meantime, a U.S. company announced in late March 2024 that it had discovered a strategically significant deposit of high-grade gallium in southwest Montana.
Fitch Downgrades China's Credit Outlook. China Doesn't Like the Move
On April 10, Fitch downgraded China's sovereign credit outlook to negative. The Ministry of Finance was pretty unhappy. It responded that Fitch's methodology does not capture well current government's efforts regarding economic growth.
The spokesperson of ministry showed some astonishment for Fitch's decision because
we had a lot of in-depth communication with the Fitch Ratings team
The Return of the 20-foot Container
During COVID, the demand for 40 ft containers skyrocketed. Now,
There is an increasing demand of 20-ft containers to move cargoes that are not bulky but heavy.
Also growing demand for non-commercial use of 20-ft containers; they are meant for storage or other purposes (some of them dubious)
The demand from Switzerland, a landlocked country, for the Rhine River freight corridor between Basel and Rotterdam; it involves the transit of smaller ships (nearly 5,000 vessels).
Troubles Ahead for Chinese Investment in a New Port in Peru
Considering the frequent challenges faced by China's state-owned enterprises (SOE) in their overseas investments, it makes us wonder if they conduct preliminary and rigorous due diligence. Perhaps it's a willingness to take risks or an excessive reliance on themselves, or, who knows, just incompetence - especially alarming when even an average local lawyer might have been able to advise them on potential issues.
The new port of Chancay in Peru - an investment of US$3 billion, supposedly set to be operational by late 2024, with Chinese SOE Cosco Shipping as the main investor - aims to become a hub for trade between Asia and South America
Cosco Shipping thought its investment would grant exclusivity in operations. Now, the Peru National Port Authority has requested the cancellation of the exclusivity agreement for operations that the Government had granted to Cosco Shipping in 2021, since it would go against free competition, as stated in the National Port System Law.
Cosco Shipping announced it will take legal actions.
That's all folks, see you next week!
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