Although there is no simple comparison between the trade results, China's trade surplus for seven consecutive months at least shows the resilience of exports.
Statistics show that in July, China's monthly trade surplus increased by 90.9%. In the first seven months, China's exports were 13.37 trillion yuan, imports were 10.23 trillion yuan, and the trade surplus was 3.14 trillion yuan, an increase of 62.1%. To observe China's trade surplus, we should not only look at the absolute volume, but also pay attention to the background, structural optimization and export competition pattern of the trade surplus.
In the first half of 2022, the deficit of the United States increased by US $134.1 billion year-on-year. In the first five months of the euro zone, Germany had a trade deficit for the first time in nearly 30 years in May. Japan's trade deficit in the first half of the year set the highest record in nearly 43 years. South Korea had a deficit in five of the first seven months, and India set the highest deficit record of US $31 billion in July. Although there is no simple comparison between trade results due to differences in cost driving, product structure, trade objects and other factors, China's trade surplus for seven consecutive months at least shows the resilience of exports.
Since the beginning of this year, China's exports have also been under the pressure of rising raw material costs. In the first seven months, the average price of imported crude oil has risen by 58.3%, coal by 93.2%, natural gas by 63.1%, refined oil by 40%, steel by 28.7%, and copper by 8.3%. Even under such circumstances, China still recorded a trade surplus, which shows the ability and financial skills of enterprises to absorb pressure.
Import and export are greatly affected by exchange rate factors. Devaluation of local currency is conducive to increasing exports, while appreciation on the contrary inhibits exports. In terms of RMB, China's trade surplus expanded by 62.1% in the first seven months, while in terms of USD, it increased by 61.6%. Obviously, the depreciation of RMB played a certain role in the trade surplus. However, the depreciation of euro, Japanese yen, Korean won and Indian rupee is far higher than the depreciation of RMB. China can still maintain the favorable balance advantage, which shows that it is not caused by a single factor of exchange rate. When the RMB depreciates slightly, it still wins a good favorable balance, indicating the competitiveness of Chinese products.
From the perspective of trade type, in the first seven months, China's general trade exports were 8.6 trillion yuan, accounting for 64.3% of the trade surplus, and the processing trade exports were 3.01 trillion yuan, accounting for 22.5% of the trade surplus. From the perspective of growth, the general trade was 15.5 percentage points higher than the processing trade. This shows that local enterprises played the main role in stabilizing the export market, but at the same time, the processing trade still achieved a positive growth of 5.2% in July, In the domestic processing trade, foreign-funded enterprises accounted for more than 70%, indicating that their operations in China remained stable.
China's trade surplus has been continuously maintained for 27 years and 7 months. Today's trade surplus is not only obtained through the price competitive advantage of labor-intensive products and low value-added products. In the first seven months, seven categories of labor-intensive products, such as clothing and toys, achieved a positive export income of 2.41 trillion yuan, accounting for 18% of the total export value. The export of mechanical and electrical products rose across the board, and the export of electronic products and mechanical equipment achieved more than double-digit growth. The export of the whole mechanical and electrical products increased by 10.1%, accounting for 56.6% of the total export value. Obviously, China's export trade is moving towards the upstream of the international industrial chain, the export structure is constantly optimized, and the international competitiveness is significantly improved.
The large-scale growth of the surplus is directly related to taking the RCEP express which took effect at the beginning of the year. From the perspective of export regions, ASEAN's position as China's largest trading partner is more consolidated. In the first seven months, China's exports to ASEAN were 2.05 trillion yuan, generating a trade surplus of 562.6 billion yuan, an increase of 76.4%. Although China's trade surplus with the EU, the second largest trading partner, and the United States, the third largest trading partner, both increased, the growth of China's trade surplus with ASEAN was 4.7% and 54.7% higher than the latter two. As the core camp of RCEP, ASEAN countries and China have close trade relations. The ideal result that can be expected is to decompose the uncertainty risk of China's future exports to the greatest extent.
To observe China's trade surplus, we can neither stay at the surface data nor be satisfied with the rough outline. Through in-depth analysis, we can draw the following conclusions from the results of the export trade surplus:
First of all, China's foreign trade is operating on a benign track of balance of payments. Based on the win-win and multi win rules of trade, for any economy, the larger the self surplus, the better, or it may damage the trade balance between countries. According to international experience, the current account surplus is controlled within 4% of GDP, which means that the country's international balance of payments tends to balance. Historically, China's current account surplus once reached the highest value of 7% and then declined continuously. From the absolute value of the trade surplus in the previous July (excluding the service trade deficit in the same period), it accounted for no more than 2% of the nominal GDP, indicating that China's trade surplus was in a reasonable range, and the balance of international payments is expected to continue on this basis.
Second, current account trade is becoming more and more balanced. In addition to the trade in goods, the current account also includes the trade in services. Unlike the trade in goods, there is a deficit in China's trade in services at present, and the deficit has lasted for 27 years. Theoretically, the trade in goods and the trade in services in the current account are favorable and unfavorable to each other, which is a relatively good matching state. Moreover, few countries have "double surpluses" in practice. But from the dynamic perspective, China's trade surplus in goods will gradually decrease under the influence of various factors in the future. At the same time, the export of service trade will be significantly improved, and it is not even ruled out that China will reap a surplus. The more balanced relationship between trade in goods and trade in services reflects not only the continuous upgrading of China's export competitiveness, but also the deep optimization of China's export structure.
Third, China is in a time window of initiative and promising in international economic and trade. According to Mundell's theory, a commodity can enter other countries' markets through trade and investment. Investment is a substitute for trade. At the same time, together with the current account, together with the capital and financial account, it can more comprehensively and accurately reflect the real situation of a country's international competitiveness. Unlike the continuous surplus of current account, China's capital account has always been a deficit, and the deficit in the first half of this year reached 148.8 billion US dollars. With the greater opening of the domestic financial market, foreign direct investment will continue to expand, and the trend of the capital account deficit will continue. However, the ability of Chinese enterprises to invest abroad will also be significantly enhanced, and the capital account deficit may show a gradual convergence of initiative. Capital account deficit and current account surplus are also ideal.
