China’s auto and component exports more than doubled in 2021 from a year earlier, outpacing overall Chinese export growth by 30%, Bernstein analysts noted.
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BEIJING — China’s recent Covid lockdowns pose a greater risk to global inflation today than they did in 2020, analysts at Bernstein said.
That’s because the world has become more dependent on Chinese goods since the pandemic began, analysts said in an April 8 note.
China’s share of global exports rose to 15.4% in 2021, the highest since at least 2012.
China’s exports have surged over the past two years as the country controlled the first Covid outbreak in weeks and resumed production while the rest of the world struggled to contain the virus. China has maintained its zero-Covid policy while other countries have eased controls over the past year.
In recent weeks, mainland China has weathered its worst Covid wave in two years, with lockdowns and travel restrictions that foreign business leaders have described as tougher than early 2020. Stay-at-home orders and virus testing requirements have particularly hit coastal economic hubs like Shanghai.
“We think the macro impact of the lockdowns in China could be quite high and something the market is not yet pricing in,” Bernstein’s Jay Huang and a team said in a report.
Compared to pre-pandemic levels, export container costs in Shanghai are five times higher and air freight rates are twice higher, said the report, which found similar strains on suppliers’ delivery times. “Therefore, there would be higher inflation exports, particularly to China’s major trading partners, but at the same time, China’s own demand recovery would be delayed.”
Due to supply chain disruptions, Chinese electric car company Nio announced production halts over the weekend, with some production resuming on Thursday. German automaker Volkswagen said its factories on the outskirts of Shanghai and in the northern province of Jilin remained closed until at least Thursday.
Given that these recent lockdowns come at a time when global supply chains are already strained… we believe the impact of this lockdown on global inflation and growth prospects could be much larger than it was in 2020.
Bernstein’s analysis found that China produces most of the overseas demand for containers, ships, rare earth elements and solar panels — along with most of the cell phones and personal computers.
Chinese factories are no longer just completing final assembly for these electronic products, but also manufacturing components such as LCD panels and integrated circuits, the report said, pointing to faster growth in exports of these parts in 2021.
China’s trade data for the first quarter showed steady export growth. The country’s producer price index and consumer price index rose faster-than-expected in March, according to data Monday.
China, a rising auto exporter
Since the pandemic began, China has emerged as a major manufacturer in the auto industry, particularly in the electric vehicle supply chain, the Bernstein report said.
The analysts noted that exports of automobiles and components in 2021 grew by an average of 119% year-on-year, outpacing the 30% growth in China’s overall exports. The country accounts for about 74% of global battery cell production, the report said.
China is the world’s largest auto market and in recent years has started to encourage the development and purchase of electric vehicles, mainly through subsidies. Accordingly, foreign automakers attracted by the market have started to market electric vehicles for China in recent years.
Now Tesla, BMW and other automakers are increasingly making electric vehicles in China for export to other countries, the Bernstein report said. Including fuel-powered cars, state-owned Chinese automakers SAIC and Chery are the top volume exporters of passenger cars from China, according to the report, which notes growing sales of Chinese-made cars to Chile, Egypt and Saudi Arabia.
While the report did not discuss the specific impact of Covid lockdowns on auto-related supply chains, analysts pointed out that a number of Korean and Japanese automakers faced production disruptions in 2020 as Covid forced Wuhan into lockdown.
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In March, passenger car exports rose 14% year on year to 107,000 units, with new energy vehicles accounting for 10.7%, according to the China Passenger Car Association. The report pointed to the impact of external uncertainties and slowdowns in exports to Europe.
China vehicle exports accounted for around 3.7% of vehicle sales outside the country in 2021, albeit up from less than 2% in the previous two years, according to the Bernstein Report.
– CNBC’s Michael Bloom contributed to this report.