China’s goods exports in USD terms increased 32.3% year-on-year in April, reflecting robust external demand and higher export prices. This follows the 49% year-on-year growth recorded in the first quarter of 2021, which was in part boosted by a particularly low base at the height of the coronavirus pandemic last year.
The rebound of Chinese exports is in keeping with the global economic recovery that is taking hold.
Adjusted for prices, we estimate export volumes increased 19.7% year-on-year in April, after growing 18.4% year-on-year in March and 34.7% in in the first quarter of 2021 as a whole.
On a seasonally-adjusted measure, we estimate that export volumes remained steady from a month ago, following the spike in the first two months (Exhibits 1, 2).
Exhibit 1: Merchandise trade (% change, unless otherwise indicated)
We expect export momentum to remain strong in the coming months. New export orders continued to expand according to official and Caixin PMI readings for April.
Global shipping delays and supply chains disruption may complicate the export outlook for the second quarter of the year, while the likely retreat of pandemic-related demand (for personal protective equipment, computers and laptops) could also dampen China’s exports from the second quarter onwards.
That said, China’s role in global supply chains doesn’t seem to have diminished, as evidenced by the improvement in exports that has been broad based across goods categories in recent months. This supports our view that a strong global economic recovery will underpin China’s exports through 2021.
In the meanwhile, imports in USD terms surged as well – 43.1% year-on-year in April, after growing 38.1% year-on-year in March. Most of this growth was driven by strong commodity price increases. We estimate that import volumes increased by 11.3% year-on-year following the 14.1% growth in March. But our estimated measure of seasonally adjusted import volumes fell after gaining 3.4% quarter-on-quarter in the first quarter (Exhibits 1, 2).
Exhibit 2: China: Exports and imports, sequential
China’s domestic recovery to drive its import demand
We think China’s import momentum should pick up in the coming months given the ongoing domestic recovery.
GDP jumped by 18.3% year-on-year in the first quarter from a low base last year at the height of the pandemic, but lagged our expectation amid renewed coronavirus caution around the Chinese New Year. Positively, monthly indicators point to a recovery in consumption and investment in March.
We expect robust sequential economic growth will resume after temporary weakness in the first quarter and are optimistic about exports and manufacturing investment.
Consumption should also gain pace again as consumers become more comfortable with public health conditions and their economic situation as the impact of the pandemic recedes.
However, less generous fiscal and monetary policy will weigh on infrastructure and real estate investment after the rapid growth witnessed in these two sectors last year. The shift in growth drivers will support the import of capital goods more than the import of commodities.
Downside risks to the import outlook remain, though.
China’s labour market has yet to fully recover. And while the government ramped up its vaccination campaign in late March and significant progress has since been made, the pace of vaccinations is still not fast enough to meet the target of inoculating 40% of the population by June. Setbacks on either front would lead to slower-than-expected growth for this year and dampen China’s imports.
Tommy Wu
Tommy Wu is a lead economist at Oxford Economics. He covers macroeconomic research and forecasting on the Asia-Pacific region and the China economy. Prior to joining Oxford Economics, Tommy was an economist at the research department in Hong Kong Monetary Authority.
Louis Kuijs
Louis leads the Asia-Pacific macro team and its research. He contributes to S&P Global Ratings’ macro-credit narrative and represents the firm in events, conferences, and the media, delivering its insights and thought leadership to the marketplace. Before joining S&P Global Ratings in 2022, Louis held senior positions in both the public and private sectors, including at the International Monetary Fund (IMF) in Washington DC, the World Bank in Beijing, and at the Royal Bank of Scotland and Oxford Economics in Hong Kong. While with the World Bank, he led the China Quarterly Update, headed the Bank’s mid-term review of China’s 11th Five Year Plan, and led research on China’s saving and investment, rebalancing, and long-term growth and structural change.
