Divergent Trade Trends to Russia, EU-27 Trade with China in 2024, Dutch Lithography Machinery, HK and the Security Bill Impacting Trade and More
Issue 138, Monday 25th March 2024
Divergent Trade Trends to Russia Deepen Core Disagreements, Ahead of Xi-Macron Meeting
According to Politico, Xi Jinping will meet Macron in Paris in May. The graph mirrors well one of the core disagreements between the EU and China. Since the Russian invasion, China has increased its trade with Russia by 90%. Meanwhile, the EU has cut its trade with Russia by 70%, and the decrease is ongoing.
We doubt Xi will cede an inch. It will insist on its usual rhetoric, asserting that the EU should break away from its pattern of unquestioningly aligning with the United States etc. Expect a lot of hot air
The EU27 Imports From China Plummeted 24% in Jan 2024
Exports also dropped by 3%. In USD terms, total trade in January of the EU27 with China fell to $58 billion from $70 billion a year earlier.
In January 2024, the difference between EU exports to China (€16.9 billion) and its exports to Switzerland (€16.1 billion) is less than 5%. Imagine!
EU Member States Exports to China
For the First Time Ever, Germany Not in the Top 10 of China Suppliers
Germany drops to the 11th spot, while France doesn't even make it into the Top 20. As for the UK, although it's no longer part of the EU, it remains our dearest friend; however, it has fallen to the 32nd spot from 27th since this time last year. The United States, meanwhile, has lost its top spot and now sits at fourth place.
The craze among Chinese citizens for storing value in assets they trust continues. Switzerland has risen to the 9th spot among China's suppliers, up from 15th in Jan-Feb 2023. In the first two months of the year, China imported over $13 billion worth of gold from Switzerland, marking a stunning 150% increase in value.
At this pace, China will import from Switzerland as much gold in value as its total imports from France, Italy, Spain, and the Netherlands combined
China Imports of EU Cars Drop to 2016 Level
EU Member States Imports From China Plummeted in Jan 2024
EU imports of E-cars. Percentage of Imports from China by Value
China Exports of E-Cars to the EU Receding In Jan-Feb 2024
Exports to the European Union went down in Jan-Feb 2024 to $2 billion from $2.9 billion a year earlier.
Dutch Lithographic Machinery for Semiconductors
So far in 2024, the number one import from the Netherlands to China remains this machinery, used for projecting circuits onto semiconductor materials.
Hong Kong Passes Security Bill, Expected to Impact Trade
Controversial Article 23 Enacted as of March 23. We, along with others, believe that the thin line separating what constitutes a state secret in the PRC could significantly impact international trade. This development is likely to draw the attention of several trading partners, such as the U.S or the EU. In the meantime, China tells UK and others to stop 'smearing' new Hong Kong security law.
During Xi Jinping's era, the significance of Hong Kong in mainland Chinese trade decreased by more than 25%
One of Those Things
The IMF agreed with Pakistan to disburse $1.1 billion. While we welcome the agreement, it's important to remember that Pakistan, facing a balance of payment crisis,
Saw China siphoning out $54 billion from its economy through trade surplus in the period 2021-2023.
However, during the same period, the EU, the U.S., and the UK combined injected $27 billion into the economy through their trade deficit with this South Asian nation
Some of you might counterargue that perhaps China trades with Pakistan in yuan. While trade in the Chinese currency between the two countries has increased since Pakistan's balance of payments woes started, in 2023 it accounted for just a mere 14% of their total mutual trade. The source of this information is the State Bank of Pakistan
EU Chamber Asks China For Changes
In an excellent report, the European Union Chamber of Commerce in China (EUCCC) observes that Chinese policies extend beyond mere self-reliance. The drafters seem to believe that if China places more emphasis on creating demand, it will be perceived as less of a threat.
Frankly, we doubt that China will change course.
The Questionable Nature of China-Russia Friendship
It is said that Putin will tour a visit to 'Dear friend Xi Jinping' in May.
If we exclude Russia, Chinese exports worldwide in 2023 are not only below the exports in 2022, they are also below the exports in 2021, the year before the outrageous invasion of Ukraine.
After the Slap in the Face, China Sends a Warning to Argentina
No doubt, Milei's refusal to join BRICS in January 2024, after being one of the main talking points of Xi Jinping at the BRICS summit in South Africa last August, was received by China as a slap in the face.
As is usual in China's playbook, it sends a not-so-subtle message: cuts imports from Argentina in half according to China Customs data for January and February
Ports Partially or Totally Operated by China in the Mediterranean
Algeciras (Spain), Valencia (Spain), Tangier (Morocco), Marseille (France), Trieste (Italy), Athens (Greece), Port Said (Egypt). The two Chinese companies participating are Cosco Shipping and/or China Merchants. Both are state-owned.
The New Port of China in the Pacific
Cosco Shipping, China Merchants, and Hutchison Ports manage or are shareholders of 80% of the 95 ports currently owned by Chinese companies in 53 countries. Tagged as one more element of China's 'string of pearls' by Peruvian media
The new pearl of the necklace is the mega-port in the Bay of Chancay, 80 kilometers north of Lima.
Cosco has invested $3.5 billion to turn Chancay into the largest Chinese logistics hub south of Panama. Recently, the Peruvian government offered Brazil the opportunity to export Brazilian goods to China via the Chancay port
Brazil Launches Various Anti-dumping Probes Against China
In our opinion, Brazil holds minimal leverage in its trade relations. China's imports from Brazil are double the amount it exports to the country, giving China significant power. Bear in mind that China absorbs over one-fourth of Brazil's exports. Brazil's dependency on China places too many eggs in one basket.
Upon Lula's assumption of office, one of his initial actions was to visit Xi Jinping. A whisper from the Chinese leader resulted in a stunning surge in Brazil's corn exports to China, skyrocketing from zero to over $4 billion in just one year. As volatile as it may seem, another whisper from the Chinese leader could reverse these imports back to zero.
That's all folks, see you next week!
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