Chinese trade rebounds on electronics and exports to Russia

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China’s foreign trade grew faster than expected in the first two months of this year, driven partly by electronics and increased exports to emerging markets and Russia, with Beijing’s foreign minister touting “a new paradigm” in relations with Moscow.

China’s exports rose by 7.1 per cent in January and February compared with a year earlier, beating a Reuters poll of analysts that forecast an increase of 1.9 per cent. Imports were up 3.5 per cent, compared with a 1.5 per cent estimate. China reports economic data for January and February together to account for the disruption of the annual lunar new year holiday.

“A big driver of that export recovery has been basically the upswing of the global tech product cycle, basically electronics,” said Tao Wang, chief China economist at UBS. “We have seen that already, that cycle bottoming, in the latter part of last year.”

The improvement in China’s trade, which compares with a 5 per cent decline for the full year in 2023, is good news for policymakers as the country’s politicians gather in Beijing this week for the annual meeting of the rubber-stamp parliament.

China’s economy is struggling to rebound from a property crisis, weak consumer and investor confidence and a fall in export earnings last year, but the government has set what analysts describe as an ambitious target of 5 per cent gross domestic product growth for 2024.

In the first two months of this year, the Association of Southeast Asian Nations bloc was China’s biggest trading partner, with trade rising 4.8 per cent, followed by the EU, with which trade fell 4.1 per cent. Trade with the US was up slightly, rising 0.7 per cent.

Among China’s single-country trading partners, Russia’s ranking has risen rapidly, with bilateral trade growing 9.3 per cent to a total of $37bn in the first two months of this year and China’s exports to its neighbour rising 12.5 per cent.

Russia became China’s fifth-biggest single-country trading partner last year, up from ninth in 2020, as trade reached $240bn, exceeding a target of $200bn. Russia roughly maintained that position in the first two months of this year, losing fifth place only by a fraction to Australia.

Beijing’s foreign minister Wang Yi on Thursday emphasised how the two countries were pursuing trade as part of a strategic relationship, in comments that are likely to increase unease in the EU, which sees China as tacitly supporting Russia’s invasion of Ukraine.

“China and Russia have created a new paradigm of major-country relations,” Wang said in a press conference during the meeting of the National People’s Congress. “The two sides’ political mutual trust continues to deepen. Russian natural gas is reaching households in China, while Chinese cars are driving on the streets of Russia.”

European leaders have repeatedly warned Beijing that its support for Russia is eroding China’s popularity in the EU. But Wang said China’s partnership with its neighbour was in its own interests and not directed at any “third parties”.

China’s trade with India and Brazil also soared during the first two months of the year, rising 15.8 per cent and 33.3 per cent, respectively.

Zhang Yansheng, lead researcher at the China Center for International Economic Exchanges, attributed part of this rise to “friendshoring” as producers shifted operations away from China to evade protectionist measures by the US and EU. “The impact of geopolitics has accelerated structural changes in trade,” he said.

Moody’s analysts Sarah Tan and Aditi Raman said: “China looks to be increasingly involved in the supply chains powering India’s recent industrialisation wave as it positions itself as the next site of final assembly.”

Steel exports also surged 32.6 per cent year on year during the period, while iron ore imports rose 8.1 per cent. This was probably due to overcapacity in China, where the property slowdown has reduced domestic metals demand.

Brazil, meanwhile, was probably buying more electronics from China and exporting more iron ore, Moody’s Tan and Raman said.

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