Pandemic Recovery & Increases in China Export
Exports from China have jumped 60.6% over the first two months of 2021 in comparison to the previous year. This massive jump is in part due to several countries looking to recover from the effects of the coronavirus(COVID-19).
Large jumps in orders of steel products and natural gas products occurred during the time period, while coal products took a plunge.
Effects of the Chinese New Year
If you follow some of our previous posts, you’ll know that the factories in China shut down for a few weeks for the Lunar New year holiday, so most statisticians combine the trade data of January and February to compensate for fluctuations during the holiday, as factories can open or close at different times of the two months.
Looking Ahead with Economists in 2021
However, this increase in orders probably won’t last for the entire year, and the correlating rising prices that have occurred during the jump in exports will likely stabilize as the increase orders slow. Demand of orders from China will still likely remain high as countries continue to recover from lockdowns.
Forecasters say the Chinese export surge should decelerate as demand for masks and other medical supplies eases and overseas competitors return to global markets. Trade officials have warned that the global situation still is “grave and complex.”
Source: AP News
Chinese Economic Leader Premier Li Keqiang stated the country expects an economic target growth of over “6%”.
An Unprecedented Time for Economic Forecasts
Some economists believe that the second half of the year may slow down for exports, but with the effects of the pandemic, no one has anything much better than a best guess, since there has never been a time like this in history.
In the longer term though, we see uncertainty for exports in the second half of the year as external demand for working-from-home and anti-epidemic goods may start to slow, alongside the pandemic staying in check. In addition, more export economies would return to the market, potentially leading to more intensive competition in global markets.
Source: Bloomberg News
— David Qu, China Economist
The Effects of Exchange Rate
Another often overlooked item when it comes to trade between China and the United States is the value of the yuan to the dollar. In 2020, the value of the dollar to the yuan peaked at $1.00 dollar to ¥7.13 yuan. The value of the Yuan has been increasing since.
As of today, April 9th, 2021, the value of one dollar equals $6.55 Chinese Yuan. Whether that trend will continue is really anyone’s guess since the currency has been fluctuating rather heavily over the last five years, on top of the effects of an unprecedented pandemic.
US Tariffs on Imported Goods
Another factor that will affect the sourcing from China in 2021 is the American politics in relation to imported goods.
Currently, the Biden administration hasn’t elected to remove the tariffs of the Trump administration, stating they need to increase their leverage before working towards any new trade deals, however it is a possibility that they may get removed in the future.
Our Take on Sourcing Trends
It’s difficult to say long term wise what will happen with sourcing trends, but what is certain is companies are buying in bulk from China right NOW! Manufacturing is in full gear as countries and businesses recover from 2020 and the effects of the pandemic. Take advantage of these sourcing trends for yourself.
We’d be happy to see if we could help you.