According to the General Administration of Customs of China, China’s total export and import values in March 2023 were 2.76 trillion yuan and 2.07 trillion yuan respectively, resulting in a trade surplus of 689.2 billion yuan. Compared with the same period last year, China’s exports increased by 30.6% and imports increased by 38.1%, both exceeding market expectations. However, compared with February 2023, China’s exports decreased by 3.5% and imports increased by 11.5%, indicating a slowdown in export growth and a rebound in import growth.
The main factors that contributed to China’s trade data in March 2023 were:
– The base effect of the low trade volume in March 2022 due to the COVID-19 pandemic.
– The recovery of global demand and supply chains as vaccination programs progressed in major economies.
– The appreciation of the yuan against the US dollar and other major currencies, which made Chinese exports more expensive and imports cheaper.
– The rising commodity prices, especially oil, iron ore and copper, which boosted China’s import value.
– The seasonal effect of the Lunar New Year holiday, which reduced the number of working days in February and shifted some trade activities to March.
How China’s Trade Data Affects the Yuan
China’s trade data has a direct impact on the demand and supply of the yuan in the international market, which affects its exchange rate against other currencies. Generally speaking, a trade surplus means that China earns more foreign currency from exports than it spends on imports, which increases the demand for yuan and pushes up its value. Conversely, a trade deficit means that China spends more foreign currency on imports than it earns from exports, which reduces the demand for yuan and lowers its value.
However, China’s trade data is not the only factor that influences the yuan’s exchange rate. Other factors include:
– The monetary policy of the People’s Bank of China (PBoC), which sets the daily reference rate for the onshore yuan (USDCNY) and intervenes in the foreign exchange market to maintain stability.
– The market expectations of investors and traders, who speculate on the future direction of the yuan based on economic fundamentals, political events and risk appetite.
– The capital flows between China and other countries, which reflect the confidence and attractiveness of China’s economy and financial markets.
– The external shocks from global events, such as trade wars, geopolitical tensions and pandemics, which affect the global demand and supply of currencies.
In 2023, the yuan has appreciated against the US dollar and other major currencies, reaching a two-year high of 6.43 per dollar in February. The main reasons for this appreciation were:
– The strong recovery of China’s economy from the COVID-19 pandemic, which outperformed most other countries.
– The widening interest rate differential between China and other countries, which made Chinese assets more attractive to foreign investors.
– The weakening of the US dollar due to the expansionary fiscal and monetary policies of the US government and the Federal Reserve.
– The increasing internationalization of the yuan as more countries use it for trade and reserve purposes.
However, in March 2023, the yuan weakened slightly to around 6.93 per dollar, as China’s trade data showed a slowdown in export growth and a rebound in import growth. This indicated that China’s external demand might be weakening while its domestic demand might be strengthening. Moreover, some market participants expected that China might loosen its monetary policy or intervene in
the foreign exchange market to prevent excessive appreciation of the yuan.
How China’s Trade Data Affects the Global Economy
China’s trade data also has an indirect impact on the global economy through its effects on global trade flows, commodity prices and exchange rates. As China is one of the largest trading partners for many countries, its trade performance affects their export and import volumes, as well as their economic growth.