Despite Surging Chinese Exports, Chips Shortages And Covid-19 Raise Supply Chain Risks

China's trade continued to rebound in April, but unfortunately, the risk of supply chain disruption in Asia is increasing with semiconductor chip shortages and more Covid-19 cases in the region.

Visitors observe various kinds of chips are exhibited at different booths by semiconductor companies at the 18th China International Semiconductor Expo, Shanghai, China

Source: Shutterstock


China's trade continues to recover

China's exports increased 32.3% year-on-year in April from 30.6% the previous month, and imports grew 43.1%YoY from 38.1%YoY.

In April, exports of electronic goods increased 46.7%YoY year-to-date compared with 53.5% in March, while vehicle exports grew by 105.7%YoY year-to-date in April, continuing the high growth rates seen in March. 

One thing worth highlighting is that exports of rare earth metals have diminished

One thing worth highlighting is that exports of rare earth metals have diminished, which could result from China's increased domestic use of these elements, with increased technology R&D limiting exports.

The low base in 2020 is a big reason behind these spectacular figures, but also the recovering export demand situation in the US and Europe, as Covid-19 cases begin to subside and vaccination programmes grow.

But there are risks to both production and demand.

Imports recover for export orders and domestic demand

July, like exports, the biggest import item for China is almost always electronics, and this grew 30.1%YoY year-to-date in April, following on from growth of 30.9% YoY YTD in March.

The strong growth in electronic imports partly relates to China's own export orders but also partly stems from Taiwan. 

Given the continuing global chip shortage, we may see price increases in many goods, e.g. home appliances, cars, computers

Taiwan's chronic ongoing water shortage may have pushed some Taiwanese semiconductor companies to move production to Mainland China. We believe that this has already begun. Suppose Taiwan's chip production does not soon return to normal. In that case, we may see price increases of many goods such as home appliances, cars, and computers, given the continuing global chip shortage. The alternative is that we learn to live with goods with fewer chips and fewer functions.

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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