Shifts in Chinese exports show ties with US economy fraying

For the first time, China exported more to Southeast Asia than the US last year, highlighting the realignment of global trade that's happening as the economic relationship frays between Washington and Beijing.

The 10 nations in Asean bought $524 billion of goods last year, higher than the $500 billion worth sold to the US or the value of shipments to the European Union, data released Friday showed.

But while the data show a slow decoupling happening between China and the US, it's not a clean breakup. Chinese exports to Mexico were up more than 5% through November, with companies likely shipping some products there for final sale in the US, avoiding US tariffs.

Exports to Thailand and Vietnam also fell much less than elsewhere. Chinese and foreign firms have increasingly been shipping goods there to be finished and then re-exported to developed nations, with the Bank of International Settlements writing about these "elongated supply lines" last year.

Sustained deflation in China is also dragging down the value of Chinese exports and making them cheaper for foreign consumers. In October, the index of export prices hit the lowest in data back to 2006, and was only slightly higher in November.

One cause of that drop in prices has been the slowing domestic economy, which has has also weighed on imports of goods such as semiconductors — down by double digits last year.

One big standout was trade with Russia, with exports up almost 50% and imports rising almost 13%. Chinese companies have taken advantage of competitors from elsewhere pulling out of the country and piled in, selling many more cars and other machinery.

At the same time, Chinese imports are well above the level when Russia invaded Ukraine, with Beijing buying more oil and gas from its northern neighbour.

China chip imports suffer steepest drop on record after US curbs

China's chip imports suffered their steepest drop on record last year, hamstrung by prolonged economic uncertainties and US export controls.

The value of integrated circuits imported by the world's largest semiconductor market fell 15.4% to $349.4 billion, the sharpest fall since Chinese customs data became available in 2004 and falling for the second straight year. Shipment volume also declined by 10.8%.

The sharp downturn underscores persistent weakness in the global chip industry, which has been struggling to emerge from a deep trough. Chinese demand in particular has been hurt by stringent Covid curbs and a tepid post-pandemic recovery. Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, saw its sales drop 4.5% in 2023, though management indicated it still expects healthy growth this year.

Last year, sentiment received a further blow when US President Joe Biden's administration escalated restrictions on China's access to cutting-edge semiconductors capable of training artificial intelligence models, from the likes of Nvidia Corp. and other US suppliers.

Signs are, however, emerging that global chip demand is starting to pick up. Semiconductor sales worldwide rose for the first time in more than a year in November, helped by emerging technologies like AI.