China once again upsets September’s foreign trade figures

China trade policyChina trade policy

Luis Alcaide | Little has emerged from the face-to-face meeting between Xi Jinping and Pedro Sánchez during the G7 meeting in Bali. Only the Spanish Prime Minister’s request to his Chinese counterpart to exercise his best offices with Vladimir Putin to stop his invasion and destruction of Ukraine. Nothing has come to light about the bilateral relations between Spain and China, despite the fact that China is the leading international trader of goods to Spain and a major buyer of Spanish products. Spain buys far more from China than it sells, to the point of eliminating all foreign trade.

Last September, Chinese sales to Spain amounted to 5.2 billion euros, much higher than what Spain buys from Germany (4 billion euros) or France (3.6 billion euros). What were historically the leading suppliers of goods to Spain have been largely surpassed by the dynamism of Chinese sales.

In contrast, Spanish exports to China in the same month of September only amounted to 743 million euros. This is less than the amount sent to Poland and a far cry from sales to Morocco. The trade deficit with China in September amounted to 4.536 billion euros, practically equivalent to three quarters of the total Spanish deficit which now exceeds 6.936 billion euros.

Strong export growth
Spanish exports in September grew at a year-on-year rate of 22.2%. This is once again a record for September in the last 10 years. Imports also set record highs with a year-on-year increase of 35.4%.

These figures for Spanish imports and exports confirm the good health of the productive fabric. Spain sells more and buys more on international markets. The trade deficit, for its part, increases from 2.4 billion euros in 2021 to 6.936 billion euros in September 2022.

It is not only the energy deficit that is growing, but also the non-energy deficit, which is soaring by almost 400%. A huge imbalance in trade in goods that needs strong support from services – tourism, in particular – to maintain a positive balance of payments current account. It would not be a good sign for the financial markets to add to the budget deficit a large imbalance between Spain’s income and expenditure with the rest of the world.

In the January-September period, exports grew at a year-on-year rate of 24.7% while imports advanced at a year-on-year rate of 39.8%. The export-import coverage ratio fell to 84.3%, well below that recorded in the first 9 months of 2021 and 2020. The non-energy balance, which was positive in 2021, plummeted to a deficit of 13.38 billion euros in the first 9 months of 2022.

The non-energy deficit explains the total deficit between January-September 2022 of 53.437 billion euros. Trade deficit as a result of the growing imbalance with non-EU countries and especially with China in a very prominent place. International comparisons of Spanish exports continue to show a healthy and relative dynamism. In fact, they are growing faster than sales of the EU and its main economies, including those of China with the rest of the world, but not with Spain.

In conclusion, dynamism due to the advance of Spanish exports at a time when the trade deficit is worsening. And China’s growing role in the imbalance of Spanish sales and purchases of goods with the rest of the world is being confirmed.

About the Author

Luis Alcaide
Luis Alcaide works as an economist for the Spanish government since 1961. He has been state adviser in the European Union and Bank of Spain director of communications. Alcaide published editorial articles in Spain's leading newspaper El País between 1977 and 1983, and in Diario 16 between 1985 and 1988. He regularly contributes to Economía Exterior and Política Exterior. He's founder member of Grupo Consejeros.