As such, ANZ Research expects China’s trade surplus to narrow to $US238 billion or 1.2 per cent of gross domestic product (GDP) in 2022, 35.2 per cent of the historical high level of $US676 billion in 2021. Correspondingly, ANZ Research has revised down our forecast for China’s current account to 0.7 per cent of GDP in 2022 from 1.4 per cent prior.
“The crisis could lead to downside risks to China’s trade balance.”
With external risks rising in the near term, China could release some strategic oil reserves to alleviate pressure from rising energy prices. The government has also offered to cut taxes to reduce cost pressures for local manufacturers.
The Russia-Ukraine conflict has led to a global surge in commodity prices. ANZ Research’s commodities analysts have revised up forecasts for Brent crude futures to $US125 per barrel in the first quarter and $US130 per barrel in the second quarter. This represents a 52.7 per cent year-on-year rise in oil prices compared with 63.4 per cent growth last year. The rally in commodities was the main reason behind China’s overall import growth in 2021.
China’s imports are closely correlated with global oil prices. According to ANZ Research’s calculation, every 1 percentage point change in Brent oil prices is associated with a 0.25 percentage point change in China’s import growth. About 60 per cent of China’s roughly 30 per cent total import growth in 2021 was due to price effects. According to ANZ Research’s estimates, price effects could contribute 12-15 percentage points to China’s import growth in 2022. Accordingly, ANZ Research expects China’s imports to register double-digit growth this year (22.6 per cent year-on-year). Although this is lower than the 30 per cent growth registered in 2021, it is still the second-highest import growth recorded in the past decade.