zaaval unsh.pdf

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China trade structure review

May 2011


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Contents

I. Export and import trends 4

II. The processing trade 11

III. Prices 16

IV. Composition of trade 21

V. Direction of trade 32

2


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3

3

I: Trade trends

Export growth is trending lower. Export growthrebounded to 31% in 10, but its compound growth from 07

was only 9%. Multiyear trend is now around 10%, down from20% in 1990-2008. This is still faster than the world average.

Chinas share of world exports will continue to rise. Itrose to 10% in 10, up sharply from 2% in 1990 and 4% in2000. Chinas trade share should continue to rise to 15% by

2020, as exports move up the value chain.

Import growth trend is higher than exports. Importsgrew at 39% yoy in 10, and compound growth from 07 was13%, close to its longer term trend. Imports will keep growingfaster than exports as investment remains strong.

Chinas trade surplus will gradually shrink. On a BOPbasis, trade surplus dropped to 3.9% of GDP in 10 from 07peak of 8.7%. By 11 surplus could be 3.1% of GDP. Itscontribution to GDP growth will be close to zero, vs 1.6pp in03-07. Global commodity prices are the main swing factor.


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4

4

Monthly merchandise tradeExport and importgrowth has recoveredafter the global financialcrisis.

Exports hit a new monthlyrecord of US$156 bn in Apr,and yoy growth acceleratedto 30%, up from 26% in Q1.

Import growth slowedfrom 33% yoy in Q1 to 22%

in Apr, due to both weakprocessing imports andfalling commodity importvolumes.

On a seasonally adjustedm-o-m basis, exports rose12% and imports rose 7%

in Apr.

As a result, trade balanceturned into surplus (US$11bn) in Apr after a temporarydeficit of US$1 bn in Q1.

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-30

-20

-10

0

10

20

30

40

50

60

2003 2004 2005 2006 2007 2008 2009 2010 2011

% growth

3mmaUS$ bn

Export and import growthin USD terms

Trade balance (lhs) Export growth Import growth


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5

5

Trend growth rates

Long term trends alsoshow a post-crisisrecovery, but to slower

growth rates. From 1990 through 2001,Chinas exports grew at anannual pace of around 20%.

In the years after WTOentry (2002-08) exportsgrew at nearly 30% a year.

But trend growth inexports and imports hasbeen decelerating forseveral years.

We expect trend exportgrowth to recover to 12-

14%, while trend importgrowth will be slightlyhigher.

These trends implycontinued global marketshare gains for Chineseexports, and a gradually

shrinking trade surplus.

0%

5%

10%

15%

20%

25%

30%

35%

40%

2003 2004 2005 2006 2007 2008 2009 2010 2011

Trend growth rate of Chinese exports and imports3-year CAGR of 12-month rolling sum

Imports

Exports


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6

6

China vs. the world

China export growth hasoutperformed the rest ofworld.

Since 1980, Chineseexports grew at an averageannual rate of 17%, morethan double the average ofthe rest of the world (8%).

After China joined WTO inlate 01, average annual

export growth acceleratedfrom 15% (1980-2001) to27% (02-08).

Cyclically, Chinas exportgrowth follows global trends.It fell sharply in 09 butrebounded smartly in 10.

Despite following cyclicaltrends, outperformancecontinues: two years afterthe global crisis, Chinastrend export growth ratecontinues to be double thatof the rest of the world.

-5%

0%

5%

10%

15%

20%

25%

30%

35%

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Export growth: China vs world ex-China5-year avg, yoy % change

China

World

ex-China


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7

7

Share of world exportsExport growth has drivena rapid gain in globalmarket share since 01.

From 1980 to 2000,Chinas share of globalexports rose from 0.8% to3.9%.

Market share gainsaccelerated after China

joined WTO in 01, and more

than doubled to 10.4% in10.

China surpassed Germanyas the worlds biggestexporter in 09.

Chinas rising global

market share is driven byproductivity improvementsand increased export quality,trends we expect tocontinue.

0%

2%

4%

6%

8%

10%

12%

14%

16%

China's share of world exportsannual, as % of total


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8

8

Trade balanceTrade balance as % ofGDP has declined.

From 1980 to 2004, the

average share of tradebalance (on a BOP basis) ofGDP was 2%.

Since 04, this figure roserapidly driven up by thesurging trade surplus. Itreached the peak of 8.7% in

07.

After financial crisis, thenominal trade surplusincreased at a slower pacewhile domestic growthremained strong, resultingin a lower share of GDP.

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Trade balance, % of GDP(balance of payments basis)

Trade balance/GDP

Trend


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9

9

Import drivers: construction

Construction is a keydriver of commodityimports.

About three-quarters ofChinas imports relate toinvestment demand: capitalgoods and raw materials.

Raw material purchases,particularly iron ore,correlate well with domestic

construction activity.

The collapse in commodityprices in 09 helped feed thesubsequent import surge.With prices high and risingrecently, the import volumehas started to decline.

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11

Commodity import volume and constructionmonthly 3mma, yoy % change

Construction

Commodity

imports


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10

10

Import drivers: prices

Global commodity pricesare an increasingly bigdriver of headline import

growth rates. Chinas imports and globalcommodity price changecorrelate closely, as rawmaterials account foraround 30% of the overallimport bill.

The big swings in nominalimport growth in 09-10were to a large extent theresult of commodity priceshifts.

Import growth slowed inApr, apparently because

high commodity pricesrestrained Chinese importdemand.

-60%

-40%

-20%

0%

20%

40%

60%

80%

2005 2006 2007 2008 2009 2010 2011

China's import bill and global commodity pricesmonthly, yoy % change

IMF

commodity

price index

China imports


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II. The processing trade

The assembly of imported components intofinished goods for export is a huge thoughdeclining part of Chinas trade structure. Processedexports are now 47% of total exports, down from apeak of 57%.

The scale of this industry in China is unique.

Because processed exports are always sold formore than the cost of their imports, it ensures astructural trade surplus.

Foreign-invested companies dominate theprocessing trade, and therefore make up around40% of Chinas trade surplus.

Demand swings from the developed marketsprimarily served by the processing trade are a biginfluence on the seasonal pattern of Chinas trade.

11


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12

12

Processing trade share

The processing trade isfading, but slowly.

The share of processing

exports and imports in totaldeclined to 47% and 30%respectively in 10, downfrom 55% and 40% in2000-05.

The rising share ofordinary exports was

mainly due to rapid growthin exports of heavyindustrial products, likemachinery and steel.

This is evidence thatChinese exporters areclimbing up the value chain.

The declining share ofprocessing importssuggests exporters areusing more domesticmaterials.

25%

30%

35%

40%

45%

50%

55%

60%

1994 1996 1998 2000 2002 2004 2006 2008 2010

Processing trade% of total exports/imports

Exports

Imports


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13

13

Processing trade balance

-20

-10

0

10

20

30

40

50

2005 2006 2007 2008 2009 2010 2011

Trade balance by typemonthly 3mma, US$bn

Processing

Ordinary

Processing trade surplus:the whole story.

The processing trade

surplus surged from US$45bn in 2000 to US$297 bn in08. After a short dip in 09,it widened to US$323 bn in10 again.

Since 09, the processingtrade has accounted for all

of Chinas trade surplus (vsthree fourths in 05-08),while ordinary tradeexperienced a deficit due torapidly increasing imports.


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14

Trade balance by enterprise typeFIEs generate most ofChinas surplus, whileSOEs are net importers.

Foreign-investedenterprises dominate theprocessing trade, whichmeans they make upnearly 40% of Chinastrade surplus.

SOEs, which are

concentrated in capital-intensive, resource-hungryoligopoly sectors servingthe domestic market,collectively run a large andgrowing trade deficit.

Trade surplus by enterpriseownership type, US$ bn

2001 2010

Private 1.9 197.1Foreign 7.4 124.3Collectives 6.2 14.9SOE 9.7 (153.2)

-200

-150

-100

-50

0

50

100

150

200

1998 2000 2002 2004 2006 2008 2010

Trade balance by enterprise ownership typeUS$bn

Private

FIE: wholly

owned

FIE: JV

Collectives

SOE


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15

15

Seasonal factors

Trade surplus is back toits normal pattern.

In most years, two-thirds

of the surplus comes in H2,thanks to strong sales ofconsumer goods to US andEU before Christmas.

In 09 this trend weakenedas exports stayed soft andimports surged in H2 as the

result of both volume andprice effects.

But the historical patternreturned in 10 as exportsrecovered; the small deficitin Q1 11 is also consistentwith this.

% of annual surplus byquarter

2000-08 avg 09 10

Q1 14 32 8Q2 22 18 22Q3 27 20 36Q4 36 31 34

-20% 0% 20% 40% 60% 80% 100%

2000

2001

20022003

2004

2005

2006

2007

2008

2009

2010

Seasonality of trade surplus

Q1 Q2 Q3 Q4


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III. Prices

16

Chinas export prices began to rise modestly in

07, almost entirely because of an appreciatingcurrency. Higher labor and material costs aremostly absorbed by manufacturers.

In 09, export prices generally fell, except for

processed exports from Guangdong whichremained stable.

Export prices have trended upward again sinceQ4 09, indicating Chinas manufacturers have

gained some pricing power in finished goods. Chinas export prices are not rising faster than

exports from other emerging markets, which facesimilar cost pressures.


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17

17

Export prices (1)

Export prices are on anupward march.

The most reliable export

price index is compiled byUS Bureau of LaborStatistics (green line),which fell sharply until Jul09 but is now trendingsteadily upward.

The HK index of re-

exports (red line), reflectingmainly processed exportsfrom Guangdong, did notfall as sharply becausethere was no room for pricereductions. It has also risensince H2 09 with the

recovery in processing trade. Chinas own export priceindex rebounded sharplyafter a steep fall in 09, buthigh volatility limits theusefulness of this series.

Explanation

US: Index of import prices from China, compiled by the US Bureau of LaborStatistics. Prices adjusted for changes in quality and composition.

HK: Index of re-export prices. Unit values, not adjusted for changes in quality andcomposition. Biased toward south Chinas light-industrial export basket.

China: Index of export prices. Unit values, not adjusted for changes in quality andcomposition.

90

92

94

96

98

100

102

104

106

108

110112

2005 2006 2007 2008 2009 2010 2011

Export price indicesPY=100, monthly

China export

price index

HK China re-

export price

index

US China

import price

index


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18

18

Export prices (2)

But Chinese export pricesare not rising faster thanthose of competitors.

Chinese exporters costadvantage is notdisappearing, since costs inother countries are risingeven faster.

The 20% rise in Chineseexport prices since 05 is

was lower than that forgoods from India at 31%and Mexico at 39%, thougha little higher than Turkeys17%.80

85

90

95

100

105

110

115

120125

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

EU import unit value index by countrymonthly, 2000=100

Mexico

Turkey

India

China


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19

19

Exchange rates

The impact of theexchange rate isoverstated.

Chinas trade-weightedreal effective exchange rate(REER) rose 20% in 2005-09, and rose another 2% byend Mar.

But export growth wasrobust until end 2008 when

financial crisis happened.

Moreover, Korea, Indiaand Mexicos REER rose less,Thailands the same, andthe Philippiness onlyslightly more.

An undervalued exchangerate cannot fully explainChinas outperformanceagainst other emergingmarket exporters.

60

70

80

90

100

110

120

130

Real effective exchange rate index

monthly, 2005=100

China

Thailand

India

Mexico

Korea


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20

20

Import prices

Import prices fluctuatedwith global commodityprices.

As nearly one third ofChinas imports are rawmaterials, its import pricesare heavily influenced byglobal commodity prices.

Global commodity pricehas trended upward since

early 09, and its price indexwas almost close to thepeak in Jul 08.

Chinese officials likes toblame imported inflationfor their problems, butChinas demand is itself an

important driver of globalcommodity prices.

-60%

-40%

-20%

0%

20%

40%

60%

2005 2006 2007 2008 2009 2010 2011

China's import prices and global commodity pricesmonthly, yoy % change

IMF

commodity

price index

China import

price index


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IV. Composition of trade

21

Heavy industrys share in exports hit a record of 40% in Q1,up from 38% in 10 and 35% in 09, and its contribution to

export growth also picked up to 46% in Q1.

Light industrials accounted for 32% of exports in Q1, a littlelower than that in 09-10 and from average of 36% in 02-08.

The share of electronics exports dropped to 22% in Q1, thelowest level since 03. As a result, it contributed only 15%of export growth in Q1, down sharply from 21% in 10 and26% in 00-08.

On the import side, the share of raw materials jumped to31% in Q1 due to high commodity prices, up from 27% in

09-10 and avg 20% in 02-08. Capital goods accounted for 47% of imports in Q1, down

from 49% in 10. Consumer goods imports are relativelyminor.


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22

Export composition (1)

Heavy industry productsled exports again.

Heavy industry comprised

40% of total exports in Q1,vs 38% in 10 and 35% in09.

Heavy industry droveexport growth in 02-08. Itsshare of exports rose from29% in 02 to 39% in 08.

During the downturn in 09,heavy industrial exportssuffered the most; but weare now back to the 02-08trend.

The share of electronics in

total exports fell to 22% inQ1, down from average of25% in 02-10. But it isunclear whether this is dueto slowing final demand or atemporary disruption ofsupply chains from Japanstsunami.

0

20

40

60

80

100

120

140

160

2003 2004 2005 2006 2007 2008 2009 2010 2011

Composition of exports

US$ bn, 12mma

Heavy

industry

Light industry

Electronics

Raw materials

Food

Share of export value, % of total

08 09 10

Heavy 39% 35% 38%Light 32% 34% 33%Electronics 24% 26% 24%

( )


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23

23

Export composition (2)

Exports are becomingmore sophisticated.

Heavy industry grew at an

annual average of 30% in00-08 vs 19% for lightindustry.

As a result, its share oftotal exports rose to 39% in08, up by 10 pp from 2000,while that of light industry

fell from 45% to 32%.

After a temporary collapsein 09, heavy industry exportgrowth rebounded stronglyto 40% yoy in 10, andcontributed 45% of totalexport growth.

Electronics share ofexports has been stablearound 25% since 05.

0%

10%

20%

30%

40%

50%

60%

1992

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1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Composition of exportsannual, as % of total

Heavy industry

Light industry

Electronics

Food

Raw materials

Contribution to export change, %2000-08 08-09 09-10

Heavy industry 41.2 (59.3) 44.6Light industry 28.9 (20.0) 29.1Electronics 25.5 (14.3) 21.3Raw materials 2.6 (6.2) 2.6Food 1.8 (0.1) 2.3

i i (1)


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24

24

Import composition (1)

Imports: investmentdominates.

Capital goods and raw

materials make up three-quarters of Chinas imports;consumption goods are asmall share.

Thanks to high commodityprices, raw materials shareof total imports rose to 31%

in Q1 (the highest level inhistory), and theircontribution to importgrowth reached 39%.

Due to the commodityprice collapse, nearly 60%of the import value decline

in 09 came from rawmaterials.Share of import value, % of total

08 09 10

Heavy industry 48% 52% 49%Raw materials 30% 26% 29%Light industry 12% 12% 13%Electronics 7% 8% 7%Food 2% 2% 2%

0

20

40

60

80

100

120

140

2003 2004 2005 2006 2007 2008 2009 2010 2011

Composition of importsUS$ bn, 12mma

Heavy

industry

Light industry

Electronics

Raw materials

Food

I t iti (2)


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25

Import composition (2)

25

Commodities share hassurged.

Heavy industry, which

includes most capital goods,is still by far the mostimportant import categoryby value, making up half oftotal import bill andcontributing 44% of importgrowth in 10.

But raw materials importrose rapidly since 02:average growth was 42%yoy in 03-08, vs 23% in1993-2000. Therefore, itsshare in total importsreached 30% in 08, upsharply from around 10% inthe 1990s.

Contribution to import change, %2000-08 08-09 09-10

Heavy industry 47.5 (24.1) 44.0Raw materials 32.4 (56.0) 34.8Light industry 11.3 (13.1) 13.9Electronics 6.6 (5.2) 5.1Food 2.2 (1.6) 2.1

0%

10%

20%

30%

40%

50%

60%

70%

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Composition of importsannual, as % of total

Heavy industry

Raw materials

Light industry

Electronics

Food

T d b l iti


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26

Trade balance composition

26

Surplus is in lightindustry and electronics,and deficit mainly in raw

materials. The big sources of theincrease in Chinas tradesurplus since 02 are lightindustry and electronics.

Raw materials are themain deficit item. Thanks to

rising prices, the rawmaterial deficit expanded toUS$360 bn in 10, up 54%yoy.

Heavy industry is a swingfactor, mainly because ofChinas huge steel industry.

Surging metal exportsnarrowed the deficit in 05-08, but it widened again in09-10. China is still a netimporter of machinery.

-400

-300

-200

-100

0

100

200

300

400

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Composition of trade balanceUS$ bn

Light industry

Electronics

Food

Heavy industry

Raw materials

T d b l f d


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27

Trade balance: food

27

Grain imports soared.

China is running anincreasing surplus in labor-

intensive fruits andvegetables, where it has acomparative advantage.

Net imports of cerealssurged in 10, mainly due toless domestic supply andrelatively lower international

prices. China could importmore grain because of itscomparative disadvantagein land-intensive crops.

Government food securitypolicies will attempt toprevent major grain imports,

though with decreasingsuccess.

Grain trade balances, mtons

2000 2010Corn 10.5 (1.5)Wheat (0.9) (1.2)Soybeans (10.2) (54.6)

-9

-6

-3

03

6

9

12

15

18

21

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Trade balance: foodUS$ bn

Vegetables&

fruits

Meat/fish/

dairy

Cereals&

feed

Other

Overall

T d b l t i l


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28

Trade balance: raw materials

28

Rising prices helped todrive a larger rawmaterials deficit in 10.

Raw material deficit hit arecord of US$361 bn in 10,up 54% yoy and more thanten times of that in 01.

Oil imports were US$135bn in 10 vs US$89 bn in 09;iron ore imports were

US$79bn vs US$50 bn, bothrising more than 50% yoy.

The widening deficit wasmainly driven by rapidlyrising prices, as oil importvolumes rose only 17% yoyin 10, while iron ore import

fell -1.5%.

Deficits of raw materials bycategory, US$ bn

2001 2010

Fuels (9) (162)Ores (7) (130)Other (11) (69)

-400

-350

-300

-250

-200

-150

-100

-50

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Trade balance: raw materialsUS$ bn

Other

Ores

Oil/gas/coal

R t i l i t


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29

29

Raw material imports

Import volumes are offtheir peaks.

Raw materials import

volume surged 40% in 09,but rose just 1% in 10, andthen fell -9% yoy in Apr, vsrising 14% in Q1.

Rising global prices led toa sharp decline in coalimports in Mar after the

surge in H2 09 and 10.

China became a netimporter of aluminium in09 as the price collapsed.But with price hikes in 10,China turned into a netexporter again.

Net imports of majorcommodities

09 10

Iron ore, mt 628 619Coal, mt 104 143Copper, 000 t 3,762 3,799Aluminium, 000 t 611 (1,705)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0

100

200

300

400

500

600

700

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Commodity import volumesmonthly, '000 tons

Copper

Aluminium

Iron ore (rhs)

Coal (rhs)

T d b l li ht i d t


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30

Trade balance: light industry

30

Light industry: strongacross the board.

Garments/textiles/shoes

account for two-thirds ofthe light industrial surplus.

However growth in otherlight industrials is far morerapid and hard todisaggregate.

Light industry includessome high-tech goodswhere China is a netimporter: optical andscientific instruments.

-50

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Trade balance: light industryUS$ bn

Other

Furniture

Garments, shoes,

textiles

Optical/scientific

Overall

T ade balan e hea ind st


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31

Trade balance: heavy industry

31

Manic metals.

China exports machineryand transport equipment,

but at the low end of themarket. It remains a netimporter of capital goods.

China became a steel netexporter in 06. Steel netexport volume recovered to26 mt in 10 after collapsing

to 7m tons in 09, but stillmuch lower than the peakof 46m tons in 07.

With the price recovering ,China became a netaluminium exporter again in10, after being a net

importer in 09.Metals trade surplus

US$ bn2004 0.82006 33.92008 74.42009 4.02010 23.9

-150

-120

-90

-60

-30

0

30

60

90

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Trade balance: heavy industryUS$ bn

Metals

Chemicals

Machinery

Overall

V Di ti f t d


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V. Direction of trade

China is the final assembler for products in anetwork that draws parts from across Asia butmainly serves final demand in OECD nations.

60% of imports, mostly parts and components,come from Asia, but >60% of exports, mostlymanufactured goods, go to developed countries.

Europe is still Chinas biggest export market, witha 24% share in 10, vs 22% for North America.

Chinas trade deficit with Africa and the Middle

East has expanded thanks to higher oil importvolumes and prices. Australia and Latin Americaare also major suppliers of raw materials.

Oddly, China exports some goods to itself!

32

Total trade by region


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33

33


Asia is most of the story.

Half of Chinas trade iswith its Asian neighbors.

Japans share declined, butChina trade with itselfincreased rapidly.

North Americas sharedeclined to 16% in 10,down from 24% in 1999,while that of Europe

remained at 21%.

Latin America and Africanow account for 10% ofChinas total trade, up from4% a decade ago.

Oceania and LatinAmericas contribution totrade growth expanded in10, mainly thanks toincreased commodityimports.

Africa

4.3%

Europe

20.5%

Latin

America

6.3%

North America

15.5%

Oceania

3.4%

Japan

10.4%

Korea

7.1%

TW

5.0%

ASEAN

10.1%

China

6.6%

Others

10.9%

Asia, 50.0%


2010 total: US$3,003 bn

Exports by region


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34

34

Europe: the mainmarket.

Europes share of Chinas

exports rose from 22% in1999 to 25% in 10,remaining as Chinasbiggest regional market.Japans share droppedfrom 16% in 1999 to 9% in10.

In the past decade, theshare of exports todeveloping countries intotal exports increasedfrom 12% to 21%.

Latin America nowabsorbs 6% of Chinese

exports, vs 2% a decadeago. Asean and smallerAsian markets shareincreased from 15% to21%.

Exports by region

Africa

3.8%

Europe

24.8%

Latin

America

6.0%

North America

21.6%

Oceania

2.3%

Japan

8.5%

Korea

4.5%

TW

2.1%

ASEAN

9.2%

China

5.7%

Others

11.4%

Asia

41.0%

Exports by region

2010 total: US$1,610 bn

Contribution to export growth/decline, %

2002-08 2009 2010Asia 40 (33) 39Europe 28 (38) 26North America 19 (19) 20Latin America 6 (7) 10Africa 4 (2) 3

Oceania 2 (1) 2

Imports by region


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35

35

The Asian conveyor beltgets longer.

Asias share of Chinas

imports has been stable at60%.

Thanks to resources, LatinAmerica and Africa nowaccount for 11% of Chinasimports.

The contribution to importgrowth was back to 02-08model in 10, except for arebound in Oceania due tostrong commodity importsfrom Australia.

Imports by region

Africa

4.8%

Europe

15.7%

Latin

America

6.5%

North America

8.4%

Oceania

4.7%

Japan12.7%

Korea

9.9%

TW

8.3%

ASEAN

11.1%

China

7.7%

Others

10.2%

Asia

59.9%

Imports by region

2010 total: US$1,393 bn

Contribution to import growth/decline, %2002-08 2009 2010

Asia 61 (78) 60Europe 14 (5) 14North America 8 (4) 7Latin America 8 (6) 7Africa 6 (10) 6Oceania 4 3 6

Trade balance by region


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36

Trade balance by region

36

Deficits with Asia,surpluses withUS/Europe.

Chinas biggest regionalsurplus is still with NorthAmerica, but Europe iscatching up fast.

Biggest deficits are withregional suppliers Taiwan,Korea and Japan.

China saw a surplus withLatin America again in 10after a temporary deficit in09 due to large commoditypurchases.

In general, figures forbilateral trade balances varyenormously depending ondata source. Our data arefrom China Customs,adjusted for HK re-exports.

-100

-50

0

50

100

150

200

250

NorthAmerica

Europe

OtherAsia

LatinAmerica

Africa

ASEAN

Oceania

Japan

Korea

TW

US$ bn

Trade balance by region: 2010 vs 1999

In 2010

In 1999

Chinas trade with itself


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37

Chinas trade with itself

37

8% of Chinas importscome from China!

China is the 7th largest

source of imports for China.

Producers export goodsto Hong Kong or bondedzones in order to capture aVAT rebate on the cost ofimported inputs. Once therebate is collected the

goods are brought back intoChina for final sale.

Reduction/elimination ofVAT rebates on exports in06-07 reduced self-imports.

Basic industrial productsand electronics are themajor contributors.

Self-imports composition, %

2000 2009

Heavy ind. 41.6 50.1Electronics 31.2 32.2Light ind. 26.6 17.6

-10%

0%

10%

20%

30%

40%

50%

60%

70%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

China's imports from itself

As % of total imports (lhs) yoy % change (rhs)


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Documents

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