BOFIT Viikkokatsaus / BOFIT Weekly Review 2019/38

China Customs reports that goods trade in August sustained the downward trend of previous months. Imports continued to contract and exports were at the same level as in August 2018, with the result that the trade surplus increased. Although there was now a contraction in imports from the EU, August foreign trade trends with individual countries were generally unchanged from earlier months.

Export trends for domestic and foreign firms have been diverging this year. Growth in goods exports by Chinese firms has remained fairly brisk (up 4 % y-o-y in January-July), while exports of foreign firms (including joint ventures) were off by 5 % in the same period. In the first seven months of this year, the share of exports produced by Chinese firms rose to 60 % and exports by foreign firms operating in China declined to 40 %. Many foreign firms have announced that they have moved their export-oriented production elsewhere due to the trade war.

The trade war is also reflected in China’s processing trade. Figures from China Customs show that exports based on foreign parts and assembly contracted by 7 % y-o-y in January-August, while conventional exports increased by 3 %. Some 29 % of goods exports this year have come from the processing trade, down from 32 % last year. At its peak, ahead of the global financial crisis, processing trade accounted for 55 % of exports. Rising production costs have driven manufacturing out of China to other countries, while some parts of production chains have been shifted entirely to China.

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