China’s exports rebounded against the trend

China's exports rebounded against the trend

The number of confirmed cases of new coronary pneumonia worldwide has risen sharply to 15 million, and the global economy is expected to decline significantly in the second quarter. However, my country’s exports rebounded against the trend, and domestic demand momentum such as superimposed investment was quickly restored. In the second quarter, GDP rebounded more than expected. Why my country’s exports shows such resilience under the sharp setback of the world economy, and can it continue in the future? These are not only related to the development prospects of the external sector, but also directly affect the strength of domestic countercyclical policies.

My country is the only country in the world that has all the industrial categories listed in the United Nations Industrial Classification. Data shows that nearly 90% of the medical surgical masks and FFP masks sold globally are produced in China, and China’s ventilators production capacity also accounts for 1/5 of the world. The recent rapid growth in demand for epidemic prevention materials and home office has directly established China. Unlike other countries that are still plagued by the epidemic, our country is the first to get out of the epidemic and resume production. In this situation, the supply capacity of related products in my country is far beyond that of other countries.

At present, the export destination of epidemic prevention materials is mainly developed in the United States, Japan, Europe and other developed countries. As the world’s epidemic focus shifts from developed countries to developing countries, the sales growth of epidemic prevention materials and home office products may slow down, but it is still expected to remain relatively high. It will form a certain support for China’s exports in the future.

Excluding the disturbance of anti-epidemic materials and home office products, my country’s exports still depend mainly on the economic conditions of the world, especially developed countries. The number of newly confirmed cases in the United States has repeatedly hit record highs, but the number of deaths has decreased significantly compared with the previous period. The repeated epidemics have indeed affected the pace of resumption of work in Europe and the United States, but judging from many high-frequency data, the European and American economies are already in a trend of recovery. Driven by superimposed economic stimulus policies, advanced economies are expected to gradually recover from the bottom of the second quarter. Although the epidemic situation in other developing countries is still getting worse, it only accounts for about one-third of my country’s exports, and its impact on China’s foreign demand is relatively limited.

Looking to the future, the global epidemic will inevitably repeat before the vaccine is successfully developed. However, the gradual recovery of the economies of developed countries and the rigid demand for epidemic prevention materials in developing countries have made my country’s exports in the second half of the year likely to stabilize. Based on historical experience, when external demand no longer shrinks, the period of substantial expansion of domestic currency credit will also end. Taking into account the short-term concentrated issuance of government bonds and other factors, monetary credit expansion is expected to remain relatively high in the third quarter, and the marginal convergence trend in the fourth quarter may be more obvious.