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China's export machine roars back to life



China's export machine was under pressure from all directions last year. A trade war with the United States weighed on demand, and competition from other manufacturing hubs intensified.

Fast forward to mid-2020, and thanks to a pandemic that erupted within its borders, China's dominance of global exports has surpassed levels seen some other year.

The same coronavirus that hammered global trade has increased the appetite for goods manufactured in China, such as electronics and medical devices. These exports support the country's early recovery as other major economies scrub, raising the question of whether China's recent trade advantage will survive the pandemic.

Data from Oxford Economics and Haver Analytics show that while total volumes have fallen, China's share of global exports compared to other major exporters jumped to more than 1

8 per cent in April, before falling slightly to 15.9 per cent in July.

"It is too early to write off China's role in global supply chains," said Louis Kuijs of Oxford Economics, pointing to the "fundamental competitiveness" of Asian economies.

He added that the market share effect was partly temporary, but suggested that “there will be some permanent change. . .

Partly a function of declining activity elsewhere, China's recent success is also the result of greater resistance in exports to East Asia, driven by a shift in global demand for products to suit a world working from home.

Taiwan's exports, most of which are electronics components and IT and communications products, reached their highest monthly level ever in August. In South Korea, exports of information and communication technology products increased year on year in each of the last three months after a sharp fall in April.

  China's share of global imports has risen to its highest level ever this year

Such economies have benefited from much lower reported coronavirus infections since the second quarter. was already relieved in April, when other countries were thrown into chaos from the spread of the pandemic. New cases have been lower in China, Taiwan and South Korea than in the United States and Europe.

It paved the way for enough manufacturing activity to take advantage of a shift in the global consumption pattern. In addition to the type of floating electronics exports also seen in Taiwan and South Korea, Chinese exports of medical devices jumped in the first seven months of the year. China's trade surplus with the United States in August reached $ 34.2 billion, the highest level since November 2018.

Trinh Nguyen, a senior economist at Natixis, points to a "branch of global performance". This is reflected in South Korea, where consumer electronics and medical products have performed well, but "heavy industry" such as shipping and automobiles have struggled. In Japan, exports fell year-on-year for the sixth month in a row in August.

In China, the state has provided support for production in a way that Kuijs said was "inconceivable" in the United States. But he added that the export response in China was also due to "entrepreneurship and agile" companies. "Almost none of these companies are state-owned," he said.

Although total exports have been able to adapt to changing demand, the mood at the production hubs is mixed.

Kexin Chen, sales manager for a toy factory in Guangdong, said export orders from Europe improved, but admitted that her business was still struggling. "We expect [orders for] Black Friday and Christmas," she said.

Elsewhere, there are indications that aspects of the East Asian export boom may be driven by short-term fears over supply chains. Taiwan Semiconductor Manufacturing Corporation, the world's largest contract maker, told investors last month that technology companies were building larger stocks because they were worried that new waves of Covid-19 infection could disrupt supply chains again.

In Taiwan and South Korea, experts suggest exports were also supported by claims from Huawei before the recent US sanctions against the Chinese company.

Some experts suggest that the boom, especially in China, is a temporary effect of the pandemic. Economists at Nomura point to stimulus packages in the west, which they said helped increase consumer demand for imported goods such as laptops.

These measures contrast with more subdued stimulus efforts in China, which have focused on supply. Retail data returned to growth last month, but are still weak compared to industrial production.

"China has stimulated less and relied more on exports to pursue its own extraction," said Brad Setser, a senior fellow at the Council on Foreign Relations, a think tank that points to a "major shift in global surplus toward Asia." .

"I think the surplus over time will raise concerns that China is somehow not taking its fair share of supporting global demand among pandemics."

Further reporting by Wang Xueqiao in Shanghai [19659024]
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