Japan-China Trade in 2009 Declines for the First Time in 11 years
According to a report released today by the Japan External Trade Organization (JETRO), Japan’s total trade with China (imports and exports combined) fell 12.8% year-on-year to US$232.2 billion in 2009, marking the first decline in eleven years. Japan’s exports to China dropped by 11.6% year-on-year to US$109.7 billion, while Japan’s imports from China shrank 13.9% to US$122.5 billion.
Overview of Japan-China Trade in 2009
Japan’s trade with China posted negative growth (year-on-year) for 12 consecutive months, from November 2008 to October 2009, due to a slowing of the Chinese economy and economic downturns in Japan, the US and Europe, as a result of the financial crisis originating in the US.
This contraction, however, was smaller than the drop in Japan’s overall trade, giving Japan-China trade a record 20.5% share of Japan’s total trade in 2009. The share of Japan’s exports to China out of overall exports, at 18.9%, also set a record, making the country Japan’s largest export destination and pushing it ahead of the US for the first time. Japan’s imports from China accounted for 22.2% of Japan’s total imports, also a record.
Japan’s exports to China in 2009
Japan’s exports to China posted double-digit negative growth (year-on-year) for 10 consecutive months, from November 2008 to August 2009. This slowdown reflects a decline in Japan’s exports of electronic parts and raw materials to China, as Chinese exports of finished goods to markets in Japan, the US and Europe slowed. Japan’s exports to China saw a gradual recovery in the second half of the year, however, as production for China’s domestic market increased and the Japanese, US and European economies bottomed out. In December, Japan’s exports to China surged 51.3% (year-on-year), setting a new record (by value) of US$12.1 billion, recording positive growth in nearly every export category.
Exports of motor vehicle parts showed high growth in the second half of the year, due to increased demand for parts through expanded automobile production in China. Exports of organic chemicals also increased rapidly in the second half of the year, owing to China’s buoyant demand for automobiles and home appliances as well as construction industry-related exports, due to growth in infrastructure projects. Exports of engines (mainly for cars) also increased for the year.
Exports of plastic materials (including polyethylene), pumps & centrifuges, raw materials such as iron scraps, and digital video cameras & other video recording or reproducing apparatuses increased in the second half of the year, causing a leveling off for the year as a whole.
Exports of integrated circuits, iron & steel products, nonferrous metals, electrical apparatus, textile yarn & fabrics, computer parts, metalworking machinery and mechanical handling equipment increased in the second half of the year, although posting double-digit negative growth for the year as a whole. Exports of gas oils and other mineral fuels were down for the year, due to China’s own increased crude oil refining capacity.
Japan’s imports from China in 2009
Japan’s imports from China posted negative growth (year-on-year) in every month except January and December, suggesting a weaker recovery compared to exports.
Imports of telecommunication equipment, including cellular and smart phones, rose in the second half of the year, while imports of textile yarn & fabrics and medical products were robust for the year as a whole.
Imports of foodstuffs remained at the same level, with demand for Chinese low-cost food items recovering, reflecting a still weakened Japanese economy. Imports of clothing also remained at about the same level, thanks to steady demand for inexpensive Chinese-made clothing items. Imports of audio and visual apparatus leveled off during 2009 as well, due to increased imports of LCD TVs in the second half of the year, resulting from the Japanese government's introduction of an “eco-points” system, which encourages purchase of eco-friendly home appliances.
Imports of computers, semiconductors and other parts, as well as materials such as iron & steel products and chemicals were down, due to Japan’s weakened economy and a reduction in the country’s industrial production. Imports of coal and nonferrous metal ores, including rare metals, were also down due to a fall in China’s export capacity, among other factors.
Outlook for 2010
Japan’s trade with China will likely grow in 2010, and depending on how imports fare, Japan’s trade with China could either turn into a surplus or set another record high.
1) Economic growth in Japan, the US and Europe is expected to remain at low levels. This could delay a full-fledged recovery of Chinese exports to these markets and also keep exports of Japanese high-value added raw materials and parts to China stagnant.
2) Increased exports to China are also expected due to new demand for infrastructure projects as a result of the government’s stimulus plan. In addition, domestic demand in China for consumer goods such as automobiles and home appliances is expected to grow, which would lead to growth in exports of items used in these products.
3) While there are concerns over stagnant Chinese exports to foreign markets, Japan’s exports to China will likely be close to the record level set in 2008, on the back of continued growth of the Chinese economy.
1) Japan’s economic growth is expected to be positive, albeit at a low level. Sluggish growth in personal income is expected to lead to increased demand for inexpensive clothing and foodstuffs from China. This would not have much impact on growth in consumer goods imports overall, as the push-up effects (in value terms) of such low-cost items are thought to be limited.
2) Imports of coal and rare metals, among other resource-related items, are unlikely to recover, as China’s tight supply and demand conditions resulting from increased domestic demand for these products will likely continue.
3) Japan’s imports from China are expected to grow in 2010, but without a recovery in Japan’s domestic demand, the record set in 2008 may be difficult to top.
*Figures are US dollar conversions of yen-denominated statistics for imports (provisional) and exports (fixed) released by Japan’s Ministry of Finance in January 2010.
For more information, please contact:
China and North Asia Division