CNBC reported on March 17 that China’s trade surplus could plummet to 238 billion dollars this year, just 35% of last year’s 676 billion dollar surplus due to the impact of the Russia and Ukraine war.

Julian Evans-Pritchard, Senior Economist at research firm Capital Economics, said, “The Russia-Ukraine war will soon put pressure on net trade as overseas demand weakens and import billings become higher.”

Betty Rui Wang, Senior China Economist at ANZ Research, said the war could lead to a broad-based slowdown in the global economy, especially in Europe. Europe is China’s second-largest trading partner, accounting for 15 percent of its total exports.

Rui Wang said, “Statistically speaking, EU economic growth is highly correlated with China’s export value growth.” She added that for every one percentage point decline in the EU’s GDP growth rate, China’s export growth decreases by 0.3 percentage points.

According to ANZ Research, the war worsened the global chip shortage, and China’s electronics exports are highly dependent on chips. China’s exports grew by 30% in 2021, with electronics contributing 17.1%.

The Ukraine crisis also led to sharp fluctuations in oil prices, which soared to a record high last week before falling more than 20%. China, the world’s largest oil importer, will be hit.

According to DBS Bank economists Nathan Chow and Samuel Tse, China imported 423 billion dollars’ worth of energy last year, of which 253 billion dollars was crude oil. If the average oil price rises from 71 dollars to 110 dollars per barrel this year, China’s nominal GDP will decrease by 0.8%. However, if it remains neutral on Russian sanctions, it could import cheaper oil from Russia, partially compensating for higher energy prices.

China is also facing the risk of possible sanctions from the West if the regime supports Russia in the war with Ukraine.

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