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Official July China Trade Data: Chinese Industrial Sector Shows Risks of 2021 Slowdown

By John W. Miller, Chief Economic Analyst - Trade Data Monitor: China’s industrial sector is headed for a slowdown in the second half of 2021, according to an analysis by Trade Data Monitor, the world’s premier source of trade statistics.

In July, overall exports increased 19.4%, to $282.7 billion, compared to the same month a year earlier, below analysts’ expectations. In June, they had increased 32.2% year-on-year. Imports in July rose 28.1% year-on-year, to $226.1 billion, compared to 36.8% in June, according to TDM data.


The reasons include Covid outbreaks, bad weather, and high shipping costs dented trade in July. In addition, a capacity squeeze is inflating commodity prices, prompting Chinese buyers to slow imports, as authorities consider import tariffs to trigger more domestic purchases.


The upshot is, most likely, a slowdown in Chinese economic growth in the second half of 2021. China’s expected GDP growth is now 5.1% in the third quarter, down from 6.4%, according to a recent projection by Nomura Holdings Inc. For the year, GDP growth is now expected at 8.2% instead of 8.9%, Nomura said.


To be sure, the higher base of the second half of 2020, compared to the Covid-weighed first half of 2020, will contribute to making trade appear less impressive during the rest of this year.

But the cause for concern is real. Authorities in several dozen Chinse cities have had to shut down businesses and factories. A semiconductor shortage continues to bite. The disease has broken out in eastern and southern China, site of ports and other export hubs. In addition, Chinese authorities are looking to reduce dependence on foreign commodity suppliers.


It’s China’s diminishing imports of raw materials that should be most alarming. Analyzed by value, imports of raw materials appeared to increase or flatten. But by quantity, there is a clear loss of demand. By quantity (again, not value), here’s how much imports of essential raw materials fell year-on-year in July: soybeans (-14.1%), vegetable oil (-21.9%), iron ore (-21.3%), crude oil (-19.2%), fertilizers (-33.2%), plastics in primary form (-31.4%), and paper pulp (-10.8%). There were some exceptions. Imports of copper ore and concentrates increased 5.1%.


On the export side, we’re seeing the post-lockdown economy taking shape. People are traveling again. Exports of luggage and suitcases increased 32.5% to $2.5 billion. In a saturated market, exports of mobile phone fell 9.2% to $10 billion.

Despite outbreaks of Covid and variant diseases in the U.S. and Europe, people also are not as sick as a year ago. Exports of medical and surgical equipment fell 17% to $1.7 billion.

China’s heavy duty industrial sector, which fired up before its competitors in the U.S. and Europe, is rebounding. Exports of steel products ramped up 108.4% to $7.6 billion. Shipments of unwrought aluminum products increased 67.2% to $1.6 billion.

China’s economy is also making ever bigger leaps toward competing with the U.S. and Europe in making high-end goods packed with sophisticated electronics and engineering. Exports of motor vehicles increased 114% to $2.9 billion. Shipments of textiles and yarns, however, declined 26.7% to $11.7 billion.


By geographical region, China’s trade appears steady. The U.S., Europe, and Asia, are all experience similar degrees of Covid resurgence. Exports to the European Union increased 17.9% to $43.3 billion. Imports from the EU rose 19.8% to $25.9 billion. Exports to the U.S. increased 13.6% to $49.6 billion. Imports increased 25.4% to $14.1 billion. Exports to ASEAN countries increased 14.9% to $39.8 billion. Imports rose 27.8% to $30.8 billion. Exports to Singapore, however, fell 17% to $4.4 billion, as the logistics hub experienced Covid-related shutdowns. We’re not locked down like a year ago, but we’re still living in a world shaped by Covid.


For a copy of the July China Trade Data and for detailed reports on official trade data by regions, countries and products contact andrewk@kwconfex.com


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