According to a report released today by the Japan External Trade Organization (JETRO), Japan's total trade with China (imports and exports combined) rose 12.5% year-on-year in 2008 to US$266.4 billion, setting a record for tenth straight year. Japan's exports to China rose 13.8% year-on-year to US$124.2 billion, while Japan's imports from China rose 11.5% to US$142.3 billion.
The collapse of Lehman Brothers on September 15th, 2008 deepened the effects of the financial turmoil on real economies across the globe. The US, Japan and developed countries in Europe all posted negative economic growth in the fourth quarter of 2008, while China, during this same period, grew a stunted 6.8%.
Japan's total trade with China in 2008 achieved double-digit growth (year on year) in each month from January to October, with the exception of February, the month of the Chinese Lunar New Year, but fell in November and December, by 4.7% and 10.0% respectively. This was the first back to back contraction of Japan-China trade since the August 2001-January 2002 period.
Japan's exports to China rose 13.8% year-on-year in 2008 to US$124.2 billion. Exports achieved higher growth (year on year) for each month from January to October, but slipped in November and December, by 12.4% and 23.9% respectively. This slowdown reflects a decline in Japan's exports (to China) of electronic parts, raw materials (including organic compounds) and parts, as Chinese exports of finished goods to consumption locations, such as Japan, the US and Europe, slowed considerably. Japan's exports of consumer goods such as automobiles, and capital equipment were also down due to stagnant domestic demand in China. Meanwhile, exports of construction machinery, particularly large items, were robust, driven by strong demand for such items in large-scale projects, despite lower demand in housing and other real estate sectors.
Japan's imports from China rose 11.5% year-on-year in 2008 to US$142.3 billion, recording monthly growth increases (year on year) until October, also with the exception of February, and leveling off in the last two months of the year, due to stagnant domestic demand in Japan, including for clothing. Imports of foods were down for the second straight year, owing to mounting concerns over Chinese food safety, while imports of LCD TVs and DVD players/recorders increased compared to last year (a weakening trend, however, was noted for these items in the fourth quarter); imports of digital cameras were down in each of the last four months of 2008. High resource prices caused the value of Japanese imports from China to rise. The value of coal imports, for example, was up in terms of value, but down in terms of quantity. Sharp rises (by value) were also seen in ferroalloys (various alloys of iron) and low-priced ordinary steel used in general construction.
In 2008, Japan's export growth to China (13.8%) was higher than Japan's overall export growth for the year (8.9%). Conversely, Japan's import growth from China (at 11.5%) was lower than the nation's overall import growth figure (21.6%). China accounted for 17.4% of Japan's total trade, down 0.3 points from 2007, marking the first such decline in 18 years.
China accounted for 16.0% of Japan-'s exports in 2008, compared to 17.6% for the US. China even briefly overtook the US at the first spot in July and August, as the gap narrowed. Meanwhile, China's share of Japan's imports fell below the 20% mark to reach 18.8% in 2008, mainly due to high resource and energy prices pushing up imports (by value) from oil/natural resource producing countries such as Saudi Arabia.
As the downward trend that began in November 2008 is expected to continue, the value of Japan-China trade will likely decline in 2009, which would mark the first such decline since 1998. The outlook for 2009 is summarized below:
Exports:
1)If consumption remains weak in advanced economies like Japan, the US and Europe-and exports of finished products from China, the world's factory, continues to fall-Japan's exports of high value-added raw materials and parts will continue its downward trend.
2)With a 4 trillion yuan stimulus plan, the Chinese government aims for 8% economic growth in 2009. Local Chinese governments have also begun taking their own measures, which aim at creating new demand for investment in infrastructure, among other areas. This will likely lead to increased Japanese exports of public infrastructure items, such as construction machinery.
3)China's central government is developing plans aimed at adjusting and promoting ten of the country's main industries, including automobiles and steel. Part of the plan includes measures for boosting consumption, such as a reduced tax on small car purchases.
If the above economic and industrial measures can revive the Chinese economy and expand domestic demand, Japan's exports to China will likely be positively affected.
Imports:
1)Japan's imports from China are expected to remain sluggish over the next year, in particular for consumer goods, due to a stagnant Japanese economy.
2)Japanese consumers' demand for inexpensive Chinese goods may increase, but would have only a limited impact on import value.
3)Plunging resource prices may be a factor in pushing down the value of imports.
*Figures are US dollar conversions of yen-denominated statistics for imports (provisional) and exports (fixed) released by Japan's Ministry of Finance in January 2009. On a yen-basis, Japan's total trade with China fell 0.3% to 27.8 trillion yen in 2008, with exports rising 0.9% to 13 trillion yen, and imports falling 1.4% to 14.8 trillion yen.
Source: JETRO
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