Chinese Exports Surge as Trade with Russia and Southeast Asia Jumps

Chinese shipments to Russia more than doubled in March from a year earlier, contributing to a surprise increase in exports

China’s exports bounced back sharply in March, a surprise that reflects greater demand in Asia and Europe as well as improved supply chain conditions.

Another major reason that was behind the unexpectedly strong result: A more than doubling of Chinese exports to Russia in March from a year earlier, highlighting warming economic ties between the two like-minded neighbors.

Outbound shipments from China soared 14.8% in March from a year earlier, data from China’s customs bureau showed Thursday, reversing the 6.8% decline recorded during the first two months of 2023 and ending a nearly half-year string of such drops stretching back to October.

The result handily topped the 7% year-over-year contraction forecast by economists polled by The Wall Street Journal.

Imports into the world’s second largest economy fell by 1.4% in March from a year earlier, better than the 5% drop predicted by polled economists and the 10.2% decline in the first two months of the year.

The better-than-expected outcome reflected a pickup in domestic activity after Beijing began abruptly dismantling Covid restrictions late last year that had hurt consumer sentiment and disrupted factory production.

The unexpectedly strong figures also reflect Beijing’s growing economic ties with Moscow as its tensions with the West escalate.

Chinese exports to Russia more than doubled in March from a year earlier to a record $9 billion, according to calculations by the Journal based on the customs data, compared with a roughly 20% gain during the first two months of this year. Economists attributed the magnitude of the upswing to the low base of comparison from a year earlier in March 2022, just as Western countries began imposing sanctions on Russia in the wake of its Ukraine invasion.

Goods shipments to Russia totaled $24 billion in the first quarter, up 48% from a year earlier—though they still account for only 3% of China’s total exports.

In December, Russian President Vladimir Putin said he expected total trade between the two countries to reach $200 billion by 2024. Trade between Russia and China grew more than 30% last year to $189 billion.

The unexpected overall resilience in China’s export data bolstered some economists’ forecasts of gross domestic product growth in the first quarter to more than 4%, up from 2.9% in the last quarter of 2022.

In the longer term, however, economists and Chinese officials remain cautious about how much trade can power China’s overall economy through the end of the year.

While inflation appears to be easing in the U.S., the Federal Reserve is likely to consider another interest rate rise in May, a move that could curb consumer spending for a longer period of time.

The World Trade Organization last week forecast a 1.7% gain in the global goods trade for this year, up from its previous forecast of 1%—though that is still slower than last year’s 2.7% growth, thanks in part to geopolitical tensions and monetary tightening.

Economists from Capital Economics told clients in a note Thursday that China’s export upswing “may soon give way to a renewed downturn,” adding that they expect most developed economies to slip into recession this year.

Any weakness on the trade front would complicate Beijing’s efforts to ensure a smooth post-Covid recovery following an initial snapback after the lifting of restrictions, led by strong signs of life in the services sector.

“Flagging external demand and factors including geopolitics will bring greater challenges,” said Lü Daliang, a spokesman for the General Administration of Customs. “We still need to work hard to let trade play a supporting role to the economy.”

Last week, China’s new Premier Li Qiang called for more support for manufacturers selling to developed economies, as well as deepening ties in the neighboring markets such as the Association of Southeast Asian Nations, one of China’s largest trading partners.

China’s exports to Asean jumped 35.4% in March from a year earlier to $56 billion, accelerating from a 9% increase during the first two months of the year. Exports to the European Union edged up 3.4% from a year earlier in March after contracting 12% in the first two months, while shipments to the U.S. fell 7.7%, narrowing from a 22% drop in the January-to-February period, Thursday’s data showed.

Exports to Russia likely contributed 1.9 percentage points to March’s year-over-year export growth, while exports to Asean contributed 5.6 percentage points.

The degree to which overseas demand for Chinese-made goods slows will determine the amount of policy support the government is likely to provide, Goldman Sachs economists told clients in a report last week.

Goldman found that demand for Covid-related goods fell the most in 2022, while exports of housing-related products such as furniture could soften further this year, as rate increases by central banks around the world weigh on housing markets in many developed countries. New energy vehicles, however, should continue to boost China’s overall exports thanks in part to policy support from Beijing.