China is winning the trade war and its exports have never been higher

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The world’s second-largest economy closed 2020 with a total trade surplus of $ 78 billion for December, according to official customs data released Thursday. China’s total surplus for the year hit a record $ 535 billion, an increase of 27% from 2019. Meanwhile, exports soared to record highs.

“Amid all the noise of decoupling and de-globalization, somewhat unexpectedly, the pandemic has deepened ties between China and the rest of the world,” Larry Hu, chief China economist for Macquarie Capital, wrote in a statement. research report.

Louis Kuijs, chief of Asia economics at Oxford Economics, attributed China’s gains largely to the containment of the pandemic, which erupted in the Chinese city of Wuhan just over a year ago. He added that China has benefited from the high demand for protective equipment and electronics as people around the world worked from home.

“After recovering from its own Covid-19 crisis, China was open to business as the pandemic caused massive demand in the US (and other countries) for Covid-19-related goods,” said Kuijs.

China’s trade relationship with the United States, meanwhile, became even more unbalanced: Beijing’s trade surplus with Washington rose to $ 317 billion in 2020, a 7% increase from the previous year and the second-highest amount ever, according to Iris Pang , chief economist. for Greater China at ING. The figure is only $ 7 billion shy of 2018 levels, when Trump launched a sweltering trade war to rectify what he called a skewed relationship with the world’s second-largest economy.

“Judging by the surge in US imports from China in 2020, it seems reasonable to say that Trump’s trade war with the country has failed,” said Kuijs. said.

The good trade news comes days before China is expected to release GDP figures for the end of 2020 – another likely positive result. Analysts generally expect China’s economic growth to pick up even more in the last three months of the year. Reuters analysts expect Chinese GDP will increase by 2.1% for the whole of 2020.

“Such as [China] plays a critical role in many supply chains and remains a fundamentally highly competitive place to produce. It’s much easier said than done to ‘disconnect’ from it, ”said Kuijs.

However, China’s future is not without its challenges. Analysts point out that after taking office next week, President-elect Joe Biden is unlikely to ease some of the pressure on the country.

“The Biden government will take China a different, less combative and more stable approach,” said Kuijs. “But it is not politically possible for Biden to abolish tariffs on Chinese goods in the short term.”

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