China Wants to Surpass $1 Trillion in Surplus in Goods, a Production Giant and a Consumption Pigmy, China-Africa Trade and More
Issue 137, Monday 18th March 2024
China Trade 2024: SOAPBOX Forecast. China Wants to Surpass $1 Trillion in Surplus in Goods
After the so-called Two Sessions in China, the most peculiar in many years, along with the even more peculiar disappearance of the Third Plenum, this is what we believe Chinese planners aim to achieve, contingent upon future actions of the U.S. Fed
A Production Giant and a Consumption Pygmy
On the SOAPBOX issue of Jan 3, we wrote,
China appears to place trust in a sort of belief, the existence of an inexorable demand elsewhere, whether from advanced countries, the global south, or even Mars!
Now, Brad Setser, Michael Weilandt, and Volkmar Baur show in the blog Follow the Money that China’s post-pandemic surplus in manufacturing has now reached about two percent of the world GDP.
Authors point out that excess capacity would lead to excessive reliance on exports to compensate for shortfalls in internal demand. No doubt, this would raise eyebrows among other economic powerhouses, namely the EU and the U.S., which are unlikely to accept absorbing such overcapacity merely because of China's policy of being
'a production giant and a consumption pygmy.'
China-Africa Trade: Total Figures Mask Full Story
Traditionally, China's official narrative cautiously touts its Total Trade with Africa, carefully avoiding reference to the breakdown of exports/imports. If it were to do so, the true narrative would emerge naturally.
We Also Revisited EU27 Trade with Africa
On average, EU27 trade with Africa exceeds that of China by 60%, and is certainly much more balanced
The EU's total trade balance over the period 2013-2023 was exactly 0, while China's total trade balance with Africa during Xi Jinping's tenure was a stunning surplus of over a quarter trillion dollars (US$275 billion)
Regrettably, the EU in Brussels does not often present data from this perspective, allowing China's biased narrative to thrive.
Four Years of Turmoil on Freight Fees
The pandemic, the shortage (or excess) of containers, the outrageous invasion of Ukraine by Russia, the Israel-Hamas war, the Houthi attacks—you name it.
On average, freight and insurance costs are 4 percentage points higher on the EU-to-China lane than the opposite.
While 87% of EU imports from China are transported by sea, the percentage increases to 95% for EU exports to China.
When Trade Figures Do Not Match
The supply chain of inorganic chemicals is one in which mismatches in reported trade figures often appear. The spike in EU imports of oxoacid salts drew our attention, and Poland is the member state particularly eager for importing such a product category (77% of the total).
Since China is the third-largest supplier worldwide in this category, we were interested in the EU imports from this country.
What we found is a severe mismatch, which unfortunately happens quite often and raises doubts about the quality of information available for policymakers and negotiators.
China Exports of Combustion Vehicles to the EU27 Remain Flat While E-Cars Grow 42%
While in 2022, exports of electric cars were 35% of all auto exports of China to the European Union, in 2023 the percentage increased up to 43%
EU Import Data: Half of E-Cars Imported from China
Market Destinations for China E-Cars
EU's Import Regulations for Chinese E-Cars
The tools available in the EU already inform importers about the new regulations established by the European Commission for Chinese e-cars
Brandy: China is retaliating against the EU by proxy
China's Ministry of Commerce (MoC) said on March 13 that the anti-dumping investigation will start monitoring batches of Martell, Hennessy, and Remy-Martin brands.
The applicant for the anti-dumping probe is the China Alcoholic Beverages Association, and the MoC states that its claims have been substantial enough to initiate the probe.
We believe China is retaliating against the EU by proxy; consumption of domestic brandy or any international brandy other than Cognac is insignificant. In the Chinese imaginarium, brandy means Cognac
From French Cognac to Aussie Wines
Rumors suggest that China's unilateral ban on imports of Aussie wines might soon be lifted. We are confident that you can identify in the graph the moment when the Chinese government whispered to its importers, 'Stop importing wines from Australia.' And, of course, they did. What else could they do?
That's all folks, see you next week!
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