Exports To China: Stellar growth begins to slow

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March 1, 2021 6:00 AM

However, in the following months, export growth moderated, partly because China mostly sources raw materials or low value-added products (iron ore, certain steel and iron products, cotton, etc) from India where the scope for growth remains limited.

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This is a tale of two markets. India’s merchandise exports to China, its second-largest market, seems to be losing steam after an impressive 33% year-on-year jump in the April-June period in the face of Covid-19 pandemic. Growth in shipments to the neighbour slowed down considerably to 20% in September quarter and to just over 2% in December quarter.

In contrast, India’s exports to its biggest market — the US — reversed a 39% slide in the three months through June to inch up by 3% in the September quarter and 5.5% in the December quarter, according to the official data. Of course, at $36 billion, exports to the US until December were still way above those to China ($15 billion).

While the US remains the worst victim of Covid-19, China, despite being the epicentre of the pandemic, seems to have weathered the crisis better than most.

So, exports to Beijing didn’t falter in the first quarter, despite the Covid-induced disruptions in India, while those to Washingtonplunged.

As FE had first reported on September 8, trade with China didn’t suffer immediately even after the deadly border clash in mid-June (outbound shipments to the neighbour jumped almost 24% in July, compared with a near 10% contraction in overall goods exports).

However, in the following months, export growth moderated, partly because China mostly sources raw materials or low value-added products (iron ore, certain steel and iron products, cotton, etc) from India where the scope for growth remains limited.

In fact, after an almost ten-fold rise until July, India’s steel and iron exports to China started to slow, as Beijing’s appetite for the commodities to push infrastructure projects began to moderate. By the end of the third quarter, the rise in such exports was only to the tune of 27% on year to $2.4 billion.

The US, however, buys a much wider portfolio of items from India, which boosts the potential for bilateral trade.

India was forced to put in place a stringent lockdown (from March 25 until it was gradually relaxed from June) that choked its supply chain, albeit temporarily, while both external and internal demand was battered by the pandemic, causing exports to crash. Once the lockdown was lifted and supply disruptions eased considerably, exports made a fragile recovery (on a quarterly basis), especially to the US. Of course, monthly export growth still showed wide fluctuations.

Meanwhile, the country’s exports to Hong Kong, considered a close proxy for Beijing, have faltered at a faster pace than overall goods exports. While exports to Hong Kong dropped 16% in the April-December period to $7 billion, overall exports declined by 15.5%.

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