More evidence of China’s export rebound

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Source of picture: Businesweek

 

More evidence is emerging of the big rebound in Chinese exports resulting from government subsidies, including a Yuan now pegged to the dollar, soft and plentiful bank loans and export-tax rebates.

More than 9,000 quality control inspections of goods set for overseas shipment took place in Q3 this year – a 32% increase over the same quarter last year, said AsiaInspection, which carries out monitors these inspections.

Book and stationery inspections were up by 24%, toys 32%, shoes and fashion accessories 58% and textile apparel 63%, according to this news report on the latest AsiaInspection findings.

A further boost to China’s textiles industry was the EU’s removal of restrictions requiring companies to source a percentage of their textile business from within the EU in January 2009, the report added

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But Q3 2008 saw the collapse of Lehman Bros and the virtual grinding to a halt of the global economy, so comparisons with the third quarter of this year were always likely to appear good.

Export trade has bounced back from its low point. It is widely recognised, though, that it could be a very long time before shipments to Western markets return to 2007 levels.

Still, the October Canton Trade Fair reported a 20% increase in electronics, hardware, tools, transport vehicle and building material exports orders from overseas buyers as against the April Canton Fair.

Together, these products account for around 60% of China’s total exports.

And the damage done to China by the crisis is far less than elsewhere.

For example, the country’s semiconductor market is expected to fall 6.5% by value to $68bn in 2009, down from $72.9bn last year, according to this report, quoting iSuppli.

This compares with a forecast 16.5% fall in the global chip industry.

Consumer electronics exports by volume are, however, expected to be down by 10% to 30% in all categories except LCD-TVs and Set-Top Boxes, where growth is expected.

What on earth does this all add up to then?

Here’s what I think:

*China’s exports have rebounded from their low points more quickly than other countries due to all the government support.

*Because of its ability to aggressively discount, China is gaining bigger market shares from other countries in certain export sectors – most notably textiles and garments.

*China is likely to be able to grow market share even further as it can cut costs by even more, notwithstanding a big increase in trade protectionism

But, as we have already said, demand in the West is unlikely to return to 2007 levels for a very long time and so China is only gaining bigger slices of a much smaller overall pie.

The country’s export trade has also been boosted by cheaper raw materials as result of import tax cuts and lower pricing.

The dramatic increase in chemical import volumes is partly due to both the above factors – and, of course, stronger domestic demand.

Take methyl methacrylate (MMA) and polymethly methacrylate (PMMA) as examples. Pricing remains way down on its July 2008 peak, as this graph MMAPPMAPricing200809.ppt from ICIS pricing shows.

MMA imports have risen by 293% in January-September over the same month last year, according to China customs. In September, overseas shipments increased by 87% to 16,309 tonnes.

PMMA imports were up by 67% in January-September with September cargoes totalling 20,829 tonnes – a 22% increase.

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