JETRO survey: Analysis of Japan-China Trade in 2015 (Based on imports of both countries)

Trade value falls in both exports and imports on US dollar basis

According to analysis on Japan-China trade in 2015, based on import data from “Trade Statistics of Japan” by the Ministry of Finance and the “China Customs Statistics,” total trade decreased by 11.8% to $303.3 billion, a double-digit fall for the first time in six years (since 2009), the year following the financial crisis (Note 1).

Due to a 14.5% decline in the Japanese yen against the US dollar in 2015 (Note 2), exports (referred to as China’s imports from Japan hereafter) decreased by 12.3% to $142.7 billion and imports also declined by 11.3% to $160.6 billion. The figures converted into the Japanese yen, however, indicate an increase in all total trade, exports and imports by 0.8% to 36.7 trillion yen, 0.2% to 17.3 trillion yen and 1.3% to 19.4 trillion yen, respectively.

Japan’s trade deficit decreased by 2.7% from the same period of the previous year, down to $17.9 billion. This is the fourth consecutive year in which a deficit has been recorded for Japan since 2012.
 
JETRO has conducted the survey based on imports of both countries. This is because trade statistics are currently calculated with exports based on destination and imports based on origin, without the calculation of exports to China conducted via Hong Kong. Since import statistics in China includes all goods originated in Japan, it is considered that data obtained from each country’s import statistics show a more accurate overview of the trade between the two countries. Figures in China’s import statistics are on a US　dollar basis, while those of Japan’s have been converted into US dollar figures by the Global Trade Atlas. 


Summary points:

1.Feature of 2015

(1)Exports: Decline in almost all categories except food
Due to a drop in the yen, Japanese exports decreased by 12.3% in the previous year to $142.7 billion in nearly all product categories, following a slight gain the year earlier. Electronic equipment, accounting for the largest share of exports, declined as a whole, despite a rise in integrated circuits (ICs) and communication devices. In transportation equipment, passenger cars decreased from a 22.2% increase in the previous year to a 19.9% decline. General machinery dropped across all categories except computers (including peripheral equipment), of which metalworking machines saw a significant fall from a 26.4% increase last year to a 23.0% decrease. 

Breakdown by product category:
(1)Export of electronic equipment decreased in a wide range of categories including heavy electrical machinery and electric circuit equipment such as connectors, although communication devices (including components) and ICs increased due to production of sophisticated and high-cost parts for smartphones in China.
(2)A decline of general machinery of 26.9% in volume caused a fall in value as well, brought about by a decrease of a major category—machining centers (metalworking machines)—which in turn was due to a reactionary decline following a spike in demand for smartphones seen in the previous year.
(3)The export value of chemical products and manufactured goods such as iron and steel declined due to a fall in prices in almost all categories, reflecting the sluggish market.
(4)Transportation equipment saw a drop of 10.1% in volume and 19.9% in value from a rise of 22.2% in the previous year in both volume and value. Station wagons, however, increased by 24.3% in volume. This was driven by a substantial gain in the volume of small cars due to tax breaks since October 2015, which reached 5.4 times that of the year earlier and encouraged export in the second half of year.
(5)Of food products, scallops—accounting for a 29.4% share—saw a surge of 88.5% in volume and 53.6% in value. 

(2)Imports: Shift to decline from levelling off in 2014
Imports also decreased to $160.6 billion by 11.3% in the previous year in almost all product categories. Electronic equipment, accounting for the largest share of imports, saw an 11.4% decrease from a slight gain in the previous year, mainly due to a decline in communication devices and photoelectric cells. General machinery also decreased by 14.8% from a slight increase last year, mainly due to a drop in computers (including personal computers). Apparel and accessories continued to fall by 13.1% from the year before.

Breakdown by product category:
(1)Import of electronic equipment levelled off in volume and decreased by 10.6% in value on a year basis, although mobile phone terminals such as smartphones experienced a larger growth in both volume and value since September 2015 than in the first half of the year. The import value of photoelectric cells dropped by 24.3% from a rise of 59.8% in the previous year, mainly due to a decline in volume caused by a reduction in purchase prices for electricity generated by solar power.
(2)Of general machinery, portable automatic data-processing machines such as laptop computers and tablet terminals decreased by 21.9%, due in part to counter reaction to hurried purchases in 2014 before the consumption tax hike and the termination of Windows XP support. 
(3)Apparel and accessories continued to decline by 13.1% from the year before. The main reason is considered to be transfers of production outside China, in which production used to be concentrated, judging from a rise in import from emerging Asian countries such as Vietnam, Indonesia and Bangladesh.

(3)Trade balance with China: Japan’s deficit continues for fourth consecutive year
The trade balance with China came in at a trade deficit for Japan for the fourth straight year since 2012, while shrinking by 2.7% from the previous year to $17.9 billion. The trade deficit has continued to fall since its peak in 2013.


2.Outlook for 2016:

(1)Exports: Pushed down by China’s economic slowdown and sluggish market
(1) Demand for electronic equipment is likely to be stable due to an increase in the number of parts and in prices per unit of sophisticated smartphones. Meanwhile, semiconductors and electronic components are not expected to see a significant rise due to stagnant growth in the smartphone market.
(2) General machinery is likely to see modest demand. The reason being that the introduction of new models is expected to create demand for equipment associated with manufacturing smartphones, such as machining centers—which make up a large share—although this demand is likely to be weaker than the surge in 2014. In addition, machine tools required for the automation and labor-saving functions of factories are predicted to create further demand.
(3) The export of chemical products and manufactured goods such as iron and steel is expected to continue to decrease. The raw-materials market, affected by such factors as low crude oil prices, China’s economic slowdown and excess production, is likely to need time to turn upward.
(4) The increase in export of transportation equipment is expected to remain modest. Although China’s tax reduction measures for small cars—which contributed to a slight gain in the export of passenger cars in the second half of the year—is effective until the end of 2016, the automobile industry forecasts only a single-digit sales growth amid concerns over the slumping economy in China.

(2)Imports: Continue to fall, although negative impact from reactionary decline dissipating
(1)The import of apparel and accessories from China is likely to decrease due to further transfers of production to other countries with lower wages to avoid rising labor costs in China.
(2)Demand for photoelectric cells and portable automatic data-processing machines such as laptop computers and tablet terminals are expected to rebound from a significant fall in 2015, caused by a counter reaction to a big gain in 2014.
(3)Chemical products and manufactured goods such as iron and steel are not expected to play a significant role in increasing import value, since import prices reduced by such factors as low crude oil prices, China’s sluggish economy and excess production are likely to need time to rebound.

(3)Total trade value and balance: Decline in total trade value to result in trade deficit for fifth consecutive year
Considering all the factors, the Japan-China trade value throughout 2016 is expected to continue to decrease. With imports continuously surpassing exports, Japan’s trade balance with China is most likely to end up deficit for five straight years.


3.China’s share of Japan’s imports marks record high at 24.8% (“Trade Statistics of Japan” by the Ministry of Finance: MOF)
China’s shares of Japan’s total trade and imports increased 0.7 points from 2014 to 21.2% and 2.5 points to 24.8%, respectively. They both marked record highs, with the share of total trade placing first for nine straight years (since 2007) and that of imports for 14 straight years (since 2002). Meanwhile, China’s share of Japan’s exports decreased 0.8 points from 2014, coming to 17.5%—the second largest share after the US. China’s contribution degree to a decline in Japan’s total export to the world (9.5%) placed highest with its decrease of 2.5 points. 

Note 1: “Trade Statistics” (MOF), in which the figures of exports have been detailed and those of imports come from nine-digit provisional estimates, indicates that the trade value is 32.7 trillion yen, a 0.3% increase; export value is 13.2 trillion yen, a 1.1% decrease; and import value is 19.4 trillion yen, a 1.3% increase. Volume indexes decreased in both exports and imports by 4.1% and 8.2%, respectively.
Note 2: The Global Trade Atlas uses the Federal Reserve Board’s exchange rate of the Japanese yen against the US dollar: 105.74 for 2014 and 121.05 for 2015.