The Chinese Communist Party (CCP) recently claimed that China’s economic growth is stable, citing a double-digit spike in exports to the Association of Southeast Asian Nations (ASEAN) in March. Some financial institutions revealed that official data could not conclude that China’s exports are rebounding as various factors need to be considered.
On April 18, China’s Bureau of Statistics said at a press conference that China “will not experience deflation,” saying China’s “exports exceeded expectations in March” and “economic growth is steady upward.”
An import and export figure for March, released by the General Administration of Customs on April 13, showed that China’s total exports in March were $315.59 billion, up 14.8 percent year-on-year, while imports were $227.4 billion, down 1.4 percent year-on-year.
Faster growth of imports and exports to ASEAN is one of the characteristics of exports in the first quarter, as officially summarized. In U.S. dollar terms, China’s exports to ASEAN, naming six major countries like Vietnam, Thailand, Singapore, Indonesia, Philippines, and Malaysia, increased by 9.0 percent year-on-year from January to February and by 18.6 percent year-on-year in the first quarter, indicating that the export data in March was better than the previous two months, pulling the quarterly growth to double digits.
However, some Chinese securities and financial institutions have challenged the government’s March export data, arguing it is not enough to tell the true story of China’s trade.
Sina, a Chinese portal site, cited on April 14 an article published by China Industrial Securities titled “Observations from Other Countries’ Trade Data: Four Questions on March Exports Data.” The report said it aims to “make some reference to restore the actual situation of trade [in China].”
Questions raised over official March export data include: How strong is ASEAN’s demand? Is there a bypass for China’s exports? How significant is the impact of the season (Chinese New Year)?
Exaggerated ASEAN’s Demands
The official data on China’s exports to ASEAN may be exaggerated as ASEAN’s import demand for China and its economy is not that strong, according to China Industrial Securities, which cited data as saying ASEAN’s manufacturing PMI (Purchasing Managers’ Index) was 51 in March, a contraction of 0.5 from February; meanwhile, the imports of six major ASEAN countries negatively grew year-on-year from January to February.
China Industrial Securities also said in the article that it still needs to be clarified whether China is bypassing ASEAN to export to the United States and Europe. Still, the export growth was likely achieved by the “advancement of the Belt and Road construction.” The Belt and Road Initiative is a foreign policy strategy of the CCP through infrastructure expansion in overseas countries.
Affected by Seasons
China Industrial Securities suggests that March export data may be impacted by the season; for example, the early timing of the Chinese New Year in 2023 may result in some orders being pushed back from January and February to March.In terms of seasonal effects, the analyst team at Shenwan Hongyuan Securities provided quantitative information in an April 6 article in Wallstreetcn.com to share a similar view: “China’s New Year-drive export growth picked up sharply by 28 percent in March compared to February, with ten percentage points filling the gap in the fourth quarter of last year and the remaining contribution coming from a low base rather than external demand.”
Industry Chain Immigration
The relocation of the global industrial supply chain to Southeast Asian countries has caused China’s upstream industries to lose orders from Western countries, thus relegating them to downstream suppliers—it may lead to an increase in China’s exports to ASEAN, according to Ou Kai, the Japanese political and economic commentator.ASEAN will need to import components from China, as the orders were originally from Chinese manufacturers, “which is fairly common in the process of supply chain transfer,” Ou Kai told The Epoch Times on April 17.
During the epidemic in the past three years, Southeast Asian countries took many orders from textile enterprises in Jiaxing, said Zhu Yu, manager of the foreign trade department of Jiaxing Yunxiang Knitting Co., Ltd, to the Chinese state media last December. Jiaxing is a thriving city in Zhejiang Province.
Zhu was among those who had a “foreign trade mission” to go to Europe to grab orders.
The first batch of business round-trip charter flights going abroad to grab orders was organized by the Ningbo Municipal government of Zhejiang Province on July 10, 2022, destined for Europe. After ten days, the second batch was destined for Milan, Italy. As of December 2022, Ningbo has arranged 263 group tours.
Authorities in provinces such as Sichuan, Guangdong, Fujian, Hunan, Shandong, and Hainan were all scrambling to arrange order-grabbing group charter flights.
The Jiangsu provincial authority claimed on April 3 that this year, enterprises in the province will set off “a wave of order grabbing overseas.” As a manufacturing hub, Jiangsu Province’s industry led the activity in China.
Shaanxi Province, Shanghai’s Huangpu District, Shandong Province’s Qingdao City, and Guangdong Province’s Zhongshan City have introduced financial subsidies to encourage enterprises to seize orders abroad.
The wave of seizing orders is due to a crisis of foreign trade enterprises facing no orders and the prospect of workers losing their jobs.
Export Outlook
Official figures paint a positive outlook for China’s exports, but some experts are skeptical about it. Zhang Liqun, a researcher in the macroeconomic research department of the Development Research Center of the State Council, told Chinese financial media on April 18 that export data in the first quarter is tumbling and the difficulty of stabilizing exports cannot be overlooked.“It is essential to understand that the economic data projected by the CCP has always played the role of ‘stabilizing expectations.’ Now those figures also have the same effect,” said Ou Kai.
“Stabilizing expectations” means the CCP tends to achieve the results they want by rigging the data rather than judging the actual situation objectively through the data, according to Ou Kai.
“This is nothing more than political propaganda by the CCP to prove that the regime can survive without [doing business with] the United States and [other Western countries],” Ou Kai said, referring to the government’s emphasis on a surge in exports to Southeast Asian countries.
The General Administration of Customs announced in mid-January that in 2022 China’s exports to ASEAN via rail transport grew by 197.6 percent, compared to the 26.7 percent and 15.5 percent increases, respectively, in the waterway and air transport.
Air cargo and seaports in China remain less bustling as there is less demand from Europe and the United States.
On the future of China’s exports, Ou Kai sees that “the trend of China’s exports is going down after the extremely rogue and irresponsible behavior of the CCP during the epidemic, and the U.S., China’s largest trading partner, and the largest foreign exchange source, has set up a ‘security border’ with China.”
“On the other hand, as an investor, there is no sense in making more investments or having confidence in a place where the risks are so uncertain.
“One day, the so-called ‘world factory’ that China is so proud of will no longer exist,” Ou Kai said.
