Low value trade accounts for about 2.5% of Chinese export trade value. Much of this is cross border e-commerce traffic and has grown by 37% in 2023 and 32% so far this year. This has been good for long haul airfreight, may not be sustainable in the long run unless platforms continue to subsidize shipping costs. This article provides an assessment based on Chinese customs statistics which contrary to US or European statistics provide information on low value trade.
Posts tagged as “China”
This year Japan has witnessed an uptick in both air and containerised ocean trade. But things are not always as they seem, with much of this growth a consequence of the depreciation of the Japanese Yen. Nevertheless, some sectors and markets are showing real growth and changing dynamics in the world trading system may bring opportunities in the medium term. This includes semiconductors and automotive, and trade with Southeast Asia and North and Central America.
The topic of Chinese influence in the Pacific looms large, but in general the share of China as an origin of imports in the Pacific has mostly stayed steady over the past decade as goods continue to utilise Australia and New Zealand connections. Fiji on the other hand, has increased its role as a regional distribution hub and improvements in air cargo and shipping connectivity could see further growth. This article looks at developments of imports into Pacific Island Countries, main trading partners, the role of China, and freight connectivity with a particular focus on Fiji. Analysis includes an interactive dashboard with commodity level trade between China and Pacific Island Countries.
With the cancellation of tariffs on Australian wine, Australian producers are hoping for a comeback in China. Until 2020, about 40% of the value of Australian wine exports went to China. At the same time Australia accounted for about 40% of the value of all Chinese wine imports. However, even before the de-facto import ban imposed on Australian wine, both imports and wine consumption were declining. For Australian producers to regain the lost market share, Chinese consumers are going to have to start drinking more wine.
International air express, air freight and containerised ocean freight do not always move in sync – even though growth in all three is correlated to changes in economic activity. Part of this is due to how quickly each responds to changes in the inventory cycle or relative price differences, but also the underlying industry segments and customer profile that driven each segment. Consumer demand has performed better (or less worse) than manufacturing activity and as such containerised shipping and express have performed better than general airfreight. Air cargo traffic – which consists of a mix of express, cross border e-commerce and general air freight – has been strong, primarily because of e-commerce.
After two bad years of declining international air cargo volumes, we should be in for a good year – possibly somewhere in the order of 10% growth based on our latest forecast. For context, that would put us somewhere close to where we were at the end of 2021. Should we believe our own numbers? If cross border e-commerce traffic remains strong, manufacturing recovers and the outlook for global growth continues to improve then it is likely that we also see a recovery in air cargo traffic. The ongoing situation in the Red Sea forcing longer routings between Asia and Europe is also likely to increase the demand for air (and rail) freight on that lane.
Global semiconductor sales dropped about 8% in 2023 but are expected to recover in 2024. As integrated circuits are found in most key products, this underlines the likelihood of a recovery of world trade in 2024. However, trade flows are likely to change over the coming years as China, the US and Europe build up own capacity and support the development of new fabs in South and Southeast Asia. Machinery trade indicates an emerging shift away from Taiwan and Korea based production of integrated chip production.
Global trade growth expectations have been successively downgraded over the past twelve months and year end 2023 numbers are likely to come out at about around 1%, according to December estimates prepared by the OECD. Long haul trade may even be solidly negative based on what we have been seeing for key trade generators such as China, the European Union, and the United States. Trade growth can only pick up if manufacturing activity does the same. The bulk of world trade consists in the movement of industrial inputs, intermediate and capital goods. As such global trade and industrial production are directly linked. Manufacturing has been weak all throughout 2023, but an improvement could take place in the second and third quarter of 2024.
The last twelve months have seen a large increase in cross-border e-commerce traffic, primarily driven by China which has increased its share as the main origin of shipments. Chinese cross-border e-commerce growth in turn appears to have been largely driven two platforms, Temu and Shein, which together with the various Alibaba Group marketplaces and Amazon account for the bulk of international volumes. We estimate that Chinese cross border e-commerce trade grew by almost 30% last year and accounted for over 8% of the value of Chinese international trade.
The decline in US air trade with China is being compensated by cross border e-commerce. After declining 11% in 2022, cross border e-commerce volumes have grown 55% in 2023 and are now 38% higher than in 2021. This increase is evident in South China and Hong Kong air cargo traffic into the US.