Export Growth Before Tax Rise
On December 10, China Custom released its latest export data for November 2024, with a Y-O-Y growth rate of 6.7%, compared with 12.7% in October (the highest growth rate in the last two years). The country maintained positive export growth for seven consecutive months, but the result was below market expectations: e.g. REUTERS forecasted 8.5% growth based on a poll from 22 economists before China announced the result. The market fears that this signals a slowdown in Chinese exports.
According to the Chinese authority, their top 3 trading partners were (in order): ASEAN, the EU, and the US. If the trade relationship were gauged country by country, however, then the US was the most important trading partner to China: China-US bilateral trade was 624 billion USD (Jan-Nov 2024) with 326 billion USD surplus: corresponding to 36.9% of China's global trade surplus. China-ASEAN and China-EU trade surpluses were 168 billion USD and 223 billion USD, respectively.
During the last few months, manufacturers, shippers, and buyers made and shipped exponential products to the US. Some media described this as "pre-Trump Inauguration stockpiling". Frontloading the shipment was a risk migration measure to avoid a potential US import tariff surge threatened by President-elect Donald Trump. From the start of the campaign, Trump promised to raise import tariffs on Chinese products by over 60% if he won. Immediately after the election, he stated on social media that he would implement an extra 10% tariff on Chinese products because China hasn't done much to stem the flow of fentanyl.
Fears of Overtrade
In October 2024, shipping industries reported a 9.3% increase in TEU container shipment to US compared to October 2023. In 2024, China shipped 900,000 TEUs per month for the fifth time; in 2023, 900,000 TEUs per month were not exceeded. However, the growth rate of China-US export values for the same period was less: 4.9% for Jan-Oct & 5.1% for Jan-Nov 2024; thus, export revenues were not keeping pace with the volume of goods exported to US. Therefore, export prices were lower than a year ago. China-US exports were already "overtraded" across the supply chain, and piling stocks need time to be digested before demand returns to normal after the market adjusts to the impact of new US tariffs.
In contrast, China's total imports declined by 3.9% in November, the second consecutive month of negative growth Y-o-Y. Due to uncertainty about the market outlook, some producers are reducing their replacement of materials and semi-product inventory after completing their export orders.
Increasing Manufacturing Capability Overseas? Or Just Tariff Circumventing
After the US-China trade conflict during Trump's first term as president, Chinese manufacturers started relocating their production capacity to other countries to avoid high tariffs. ASEAN countries would naturally be the best candidates for capacity shifting; over time, the ASEAN region became China's biggest trading partners: China-ASEAN exports increased by 11.2% between January and November 2024 on Y-O-Y. During the same period, China imported 358 billion USD from ASEAN (an increase of only 1.8% year-over-year). The trade surplus gap widened rapidly in recent years because more and more Chinese-related manufacturing bases were established in the region that shipped raw materials and parts from China, completed production within manufacturing bases in ASEAN, and then shipped to other countries like the EU or US to benefit from tariffs.
Increasingly, tariff evasion is being criticized for moving capacity overseas. Some parties even accused certain Chinese manufacturers of using affiliated production in ASEAN for country-of-origin detouring: only very low added value processes locally or just simple assembly of readily available components from China; then shipped as ASEAN products to enjoy lower tariffs than shipped directly from China.
ASEAN Solar Cells Anti-Dumping Tariff Case
Solar products from ASEAN were one of the typical cases in which US industries accused Chinese companies of setting up manufacturing facilities in ASEAN and flooding the US market with their products. US bureaus announced in November that solar cells imported from Cambodia, Malaysia, Thailand, and Vietnam would be subject to antidumping tariffs ranging from 21.31% to 271.28%. Many of these affected manufacturers have close relationships with Chinese manufacturers, including Jinko Solar and Trina Solar. Hanwha Qcells Malaysia was relieved from anti-dumping accusations in these four ASEAN members. Hanwha Qcells, headquartered in Korea, is a member of the American Alliance for Solar Manufacturing Trade Committee which filed the investigation request in April 2024, claiming that the four Southeast Asian countries are harming the U.S. solar manufacturing industry through unfair trade practices. This demonstrated to the world that US tariff implementation would be considered, and no loopholes would be allowed. A stakeholder, however, told the media in an interview that “this is a cat and mouse game”: as the US authority began examining solar product dumping in the four countries mentioned above, the Chinese manufacturers had already started putting out new solar panels in countries like Indonesia and Laos, where there was very little solar panel production at the time. Because of this, the number and capacity of production lines and capacity increased exponentially. Eventually, solar makers in Indonesia and Laos might attract the attention of US authorities.
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