How the Russia-Ukraine crisis could hit China’s trade
[ad_1]
November 11, 2021: Cargo ships unload and load containers at Qingdao Port’s foreign container terminal, Qingdao Province in East China’s Shandong Province.
Barcroft Media | Costfoto | Barcroft Media | Getty Images
China’s trade surplus soared to historical highs in the aftermath of the pandemic, when people consumed more goods. But analysts believe that the Russia-Ukraine conflict is poised to alter this trend.
The Asian manufacturing giant’s trade surplus could narrow to $238 billion this year – about 35% of the historic $676 billion attained last year, according to estimates from ANZ Research.
Julian Evans-Pritchard (senior China economist, Capital Economics) stated that the war in Ukraine would soon begin to impact net trade because of a lower foreign demand and an increased import bill.
China’s main trading partners experience growth shocks
The war could cause a broader slowdown in the global economyEspecially in Europe,” Betty Wang, senior China economist at ANZ Research, stated.
China has the European Union as its second most important trading partner. It accounts for around 15% of total Asian exports. According to ANZ Research, China’s exports to the EU grew even more last year. They accounted for 16% of China’s 30% growth in exports.
Wang stated that “statistically, the EU’s economic growth is highly correlated with China’s total exports growth.” He also said that China’s export growth would fall by 0.3 percent for every one percentage point decrease in EU GDP growth.
Fears of nickel and big chip disruption
The problem of shortages in semiconductors is already serious. However, Russia’s conflict with Ukraine will further destabilize supply chains.
ANZ Research stated that the conflict has made it more difficult to meet the demand for chips worldwide, which China relies heavily on for electronic exports. According to the research company, electronic exports contributed 17.1 percent of China’s 2030 export growth.
Both Russia and Ukraine are important players in the global supply chain for semiconductors, according to analysts.
According to ANZ. Ukraine produces rare gases like neon and krypton that are vital for the production of semiconductors. The country also makes precious metals that are used in the production of chips, smartphones, and electric cars.
A TS Lombard report released Monday said that China was among the most susceptible emerging markets to disruptions to nickel supplies due to war. The report stated that China was particularly sensitive to interruptions in nickel supply.
The London Metal Exchange stopped trading nickel last week after its prices more than doubled due to supply disruption worries caused by the war. Russia is the third largest producer of nickel in the world.
China is the world’s largest producer of electric vehicles and nickel is an important raw material for them. The number of EVs it exports to other countries jumped 2.6 times to nearly 500,000 last year – more than any other country in the world, Nikkei reported last week.
About 44% of all electric cars manufactured between 2010 and 2020 were made in China. a study found.
Elevated energy costs
Volatile oil prices have also been impacted by the Ukraine crisis. They reached record levels last week, before plummeting more than 20%. This is expected to affect China, which is the largest importer of oil in the world.
China exported $423 billion in energy products to China last year according to Samuel Tse and Nathan Chow from Singapore bank DBS. 25% of that was oil, with $253 billion being crude oil.
Economists predicted that China’s nominal GDP will be reduced by 0.8% if oil prices rise from $71 to $110 per barrel this year.
After soaring to over $130 last week, oil prices are volatile. They dropped below $100 per barrel this week. They reached $100 on Thursday again, which is well above where crude oil was traded at the start of the year, between $70 and $80.
China could however find relief by relying on Russia.
DBS economists stated that China’s neutrality in regard to Russian sanctions means that it can partly offset higher oil prices by importing less from Russia.
[ad_2]