Exports of cars and components from China have more than doubled in 2021 compared to last year, exceeding 30% growth in China’s exports as a whole, Bernstein analysts found.
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BEIJING – Covid’s recent blockades in China pose a greater risk to global inflation today than in 2020, Bernstein analysts said.
That’s because the world has become more dependent on Chinese goods since the pandemic began, analysts said in a note on April 8.
China’s share of global exports rose to 15.4% in 2021, the highest level since at least 2012.
China’s exports have risen in the past two years as the country managed to control Covid’s initial outbreak within weeks and resume production while the rest of the world struggled to control the virus. China has maintained its policy of zero Covid, while other countries have eased control over the past year.
Over the past few weeks, mainland China has dealt with its worst Covid wave in two years with blockages and travel restrictions that foreign business leaders have described as tougher than in early 2020. Home-stay orders and testing requirements viruses have particularly affected coastal economic centers such as Shanghai.
“We believe that the macro-impact of the blockade in China could be quite large and something that the market still does not appreciate,” said Jay Huang of Bernstein and team in a report.
Compared to pre-pandemic levels, the cost of export containers in Shanghai is five times higher and air fares are twice as high, the report said, noting similar burdens on delivery times for suppliers. “Therefore, there will be higher exports of inflation, especially to China’s major trading partners, but at the same time it will slow down the recovery of China’s own demand.”
Reflecting supply chain disruptions, Chinese electric car company Nio announced a halt to production over the weekend, with part of production resuming on Thursday. German carmaker Volkswagen says its plants on the outskirts of Shanghai and in the northern province of Jilin remain closed until at least Thursday.
Given that these recent blockages come at a time when global supply chains are already strained … we believe that the impact of this blockage could be much greater on global inflation and growth prospects than that, which we saw in 2020
Bernstein’s analysis found that China produces most of its demand abroad for containers, ships, rare earths and solar modules – along with most mobile phones and computers.
Chinese factories are now not only completing the final assembly of these electronic products, but are also producing components such as LCD panels and integrated circuits, the report said, pointing to faster growth in 2021 in exports of these parts.
China’s trade data for the first quarter show steady export growth. The producer price index and the consumer price index in the country rose faster than expected in March, according to data released on Monday.
China, a growing exporter of automobiles
Since the beginning of the pandemic, China has become a significant producer in the automotive industry, especially in the supply chain for electric vehicles, the Bernstein report said.
Analysts noted that exports of cars and components grew by an average of 119% in 2021 compared to the previous year, exceeding 30% growth in China’s exports as a whole. The country accounts for about 74% of world battery production, the report said.
China is the world’s largest car market and has begun to encourage the development and purchase of electric vehicles in recent years, mainly through subsidies. Foreign carmakers, attracted by the market, have started launching electric vehicles to China in the last few years.
Now Tesla, BMW and other carmakers are increasingly making electric vehicles in China to export to other countries, the Bernstein report said. Including fuel-powered cars, China’s state-owned carmakers SAIC and Chery are China’s largest exporters of passenger cars by volume, the report said, noting growing sales of Chinese-made cars to Chile, Egypt and Saudi Arabia.
Although the report does not discuss the specific impact of the Covid blockade on car-related supply chains, analysts said a number of Korean and Japanese carmakers faced production disruptions in 2020 when Covid forced Wuhan to block.
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In March, passenger car exports rose 14% from a year earlier to 107,000, with new energy vehicles accounting for 10.7%, according to the China Passenger Car Association. The report notes the impact of external uncertainty and declining exports to Europe.
Exports of vehicles from China accounted for about 3.7% of vehicle sales outside the country in 2021, albeit by less than 2% in the previous two years, the Bernstein report said.
– Michael Bloom of CNBC contributed to this report.
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