China's foreign trade defies virus odds, ends 2020 on record highs

China's total goods imports and exports expanded 1.9 percent year-on-year to 32.16 trillion yuan (about $5 trillion) in 2020, hitting a record high despite a worldwide slump in shipments, official data showed on Jan 14.

Exports rose 4 percent, while imports went down 0.7 percent, according to the General Administration of Customs (GAC). In December alone, exports surged by 10.9 percent year-on-year in yuan terms.

China emerged from the global economic and trade challenges in 2020 as the world's only major economy to have registered positive growth in foreign trade in goods, GAC spokesperson Li Kuiwen told a news conference.

During the first 10 months of last year, the country's foreign trade and exports accounted for 12.8 percent and 14.2 percent of the world's total, respectively, both reaching historic highs, Li said, citing data from the World Trade Organization and available national statistics.

"China's exports are gaining global market share for two reasons," said Alicia Garcia Herrero, the chief economist for the Asia-Pacific zone of the French investment bank Natixis. "First, it has successfully contained the spread of the virus and reopened its manufacturing capacity, while most other major economies are still grappling with production problems."

"Second, the sectoral specialization seems to have played a very resilient role despite the overall uncertain global environment," she said, adding that China saw a pronounced recovery in major commodities, including the textile sector which is supported by the demand for medical equipment such as face masks.

Positive Influencer

"China's foreign trade has achieved a rapid return to stability and continued to improve, displaying strong resilience and comprehensive competitiveness," the GAC spokesman said, noting that China's foreign trade has achieved positive growth for seven consecutive months as of June 2020.

In the first five months of 2020, foreign trade in goods dropped by 4.9 percent year-on-year to 11.54 trillion yuan, matching the decrease from the January-April period.

The rebound in trade mirrored the Chinese economy's V-shaped recovery. GDP expanded 4.9 percent year-on-year in the third quarter of 2020, up from a 3.2-percent rise in the second quarter and a 6.8-percent plunge in the first quarter.

The Chinese economy would grow at a rate of 2 percent in 2020, the World Bank Group said in its latest Global Economic Prospects. The reading is low given China's stellar record, but will still make the country the only major economy to emerge with positive growth.

"China's recovery maintained the global supply chain. The resilience of China not only benefited itself, but also benefited the global economy," J.P. Morgan's Chief China Economist Zhu Haibin told Xinhua.

"Despite the pandemic and the shutdown of international travel, China is still increasing its focus on further openness," Zhu said.

China has made notable achievements in promoting multilateral trade in 2020, including the signing of the landmark Regional Comprehensive Economic Partnership that launched the world's largest free trade bloc, and the conclusion of negotiations for the China-EU investment treaty.

"These institutional factors are very important, because China will be able to radiate its positive influence on international trade and investment more effectively than before," said Chris Leung, chief China economist of Singapore-based DBS Bank.

Gaining currency

Meanwhile, a stronger renminbi, China's currency, has raised concerns over China's export competitiveness. Hong Kong-based Hang Seng Bank expects the renminbi to strengthen markedly this year. Reasons include the market's exceptionally optimistic expectations for China's growth in 2021 and a weaker dollar.

Still, the bank expects China's exports to accelerate this year.

"The global reliance on China's industrial supply chain has greatly increased rather than weakened. Global companies will continue to diversify their production lines to reduce the risk of overreliance on China, but this will have a limited impact on trade," said Wang Dan, chief economist of Hang Seng Bank China.

Shedding light on China's trade growth momentum, Leung said trade growth in Chinese exports was initially driven by demand for pandemic-related products such as face masks and computing equipment for home working. "Yet the recovery has since broadened out, with other shipments now up year-on-year too."

The recovery in non-pandemic-related demand will also help, Leung said. "For instance, retail sales have gone from strength to strength lately in the United States. China's exports of furniture and household appliances have been particularly strong."

The customs administration expects China to maintain positive trade growth this year, as the world economy is expected to recover and the world's second-largest economy is projected to return to steady growth.