According to the latest data from the U.S. financial website CNBC’s supply chain heat map, U.S. manufacturing orders in China fell by 40% due to plummeting demand.
This situation can also be further verified from shipping related data.
According to the US supply chain digital service company project44, TEU (twenty-foot standard container) shipments from China to the United States have dropped significantly since the end of summer 2022, with total container volume falling by 21% from August to November.
After the container shipping volume from China to the United States dropped significantly, many shipping companies also began to reduce their shipping capacity.
The Ocean Alliance (CMA CGM, COSCO Shipping Lines, Orient Overseas and Evergreen ) and the THE Alliance (Ocean Network Express, Hapag-Lloyd, HMM and Yang Ming Line) have cut overall ship capacity by 40-50% until the Lunar New Year .
Moreover, this decline in orders can actually be seen from the actual performance of major coastal ports.
During the epidemic in 2020 and 2021, some supply chains in Europe and the United States were blocked. As a result, China relied on its excellent epidemic prevention and control to ensure the normal operation of the supply chain. Therefore, many orders from Europe and the United States flowed to China. In 2020 and 2021, China's export orders to the United States increased significantly and even reached a new peak.
With the rapid growth of trade, many coastal ports have been very busy in the past two years, and even one container is hard to find. The prices of many containers have risen sharply. The price of containers from China to the west coast of the United States has risen to about 20,000 US dollars at its peak, which can be described as crazy.
However, since the second half of 2022, the container throughput of many coastal ports has dropped significantly, and empty containers have increased significantly.
According to the port production operation monitoring and analysis report released by the China Ports Association official website, in November 2022, the throughput of heavy foreign trade containers (usually referred to as loaded boxes) at the eight major hub ports fell by 9.7% year-on-year, and the throughput of foreign trade empty containers increased by 23.73% year-on-year.
Corresponding to China, the volume of arriving containers at various ports in the United States is also rapidly decreasing. According to relevant data, In November 2022, the number of container imports at various ports in the United States fell by 19.4% compared with the same period last year.
With the obvious reduction in the weight of containers, the shipping prices of many containers have also dropped significantly. The current price of a 40-foot standard container from China to the West Coast of the United States has dropped to more than 3,000 US dollars, and there is still a price range of US$100 to US$200 that can be negotiated.
Against the backdrop of a decline in overall orders, my country's foreign trade exports have also slowed down significantly in the past two months.
According to customs statistics, in U.S. dollars, China's total import and export volume in October 2022 reached 511.59 billion U.S. dollars, a year-on-year decrease of 0.4% and a month-on-month decrease of 3.8%; of which exports decreased by 0.3% year-on-year and a month-on-month decrease of 7.5%.
Import and export dropped further in November. In terms of US dollars, exports in November fell by 8.7% year-on-year. Among them, integrated circuits exports fell by 27.4% year-on-year, mobile phones fell by 33% year-on-year, and computers fell by 28% year-on-year.
Then why have U.S. manufacturing orders in China fallen so much recently? Will they recover in the future?
Let’s first take a look at why orders in the United States have dropped rapidly.
There are various reasons why U.S. manufacturing orders in China have dropped significantly, but the main reason is the slowdown in domestic demand in the United States.
In the past two years, against the background of the global epidemic, many people thought that the global supply chain was affected, production and life were affected, and consumption would decline. However, from the actual situation, the United States has continued to release water, and residents have more money on hand, and their consumption has continued to grow.
Against the background of the substantial increase in consumption by American residents, imports from the United States have also increased significantly, and many orders are imported from China.
For example, in 2020, my country's exports to the United States reached 3,127.9 billion yuan, a year-on-year increase of 8.4%; in 2021, my country's exports to the United States reached 3,722.44 billion yuan, a year-on-year increase of 19%.
However, after entering March 2022, as the inflationary pressure in the United States continues to increase, the United States continues to embark on a major pace of raising interest rates. Since March 2022, the United States has raised interest rates 7 times in a row, with the cumulative rate of interest rate hikes reaching 425 basis points. The current US federal funds target interest rate has soared to between 4.25 and 4.5.
Against the background of substantial interest rate hikes, market liquidity has decreased, corporate financing costs have increased, and residents have less money. As a result, domestic market demand in the United States has slowed.
According to official retail data released by the United States, US retail sales fell by 0.6% month-on-month in November, creating the largest decline in the past year.
Against the background of slowing consumer demand, the overall import volume of the United States is actually continuing to decline.
Affected by this, not only did the United States' manufacturing orders in China decrease, 's manufacturing orders in Southeast Asia also saw a significant decline.
However, despite the obvious decrease in Asian orders, the United States' imports from Europe have increased significantly. For example, in September 2022, Germany's exports to the United States increased by as much as 50% year-on-year.
And judging from the trend of the container index, the number of containers shipped from Europe to the United States has also increased significantly in recent months, which is inversely proportional to the decrease in the number of containers imported from Asia. This shows that the current U.S. trade structure is undergoing some subtle adjustments, and the number of imports from Europe has increased significantly. This may also be a measure to balance their increase in energy exports to Europe.
Finally, let’s take a look. Will China’s orders to the United States increase in the future?
As we all know, foreign trade has always been an important driving force for my country's economic growth. Especially for many coastal provinces, foreign trade exports account for a relatively large proportion of GDP. If foreign trade export orders decline, the impact on various places will be relatively large.
Will China’s export orders to the United States return to previous levels in the future?
As for whether orders will recover, we cannot judge, but one thing is certain, China's export orders to the United States will not grow as fast as in the past two years in the future.
The reason why China's export orders to the United States increased significantly in 2020 and 2021 is because after the outbreak, the global supply chain was greatly affected. As a result, many manufacturing industries in Europe and the United States were also affected to a certain extent. In addition, rising energy prices in some regions such as Europe have led to rising costs and even affected production, which has given Chinese foreign trade companies great opportunities.
In addition, the United States started to release money at that time, and people had more money on hand, so their spending power was relatively strong.
But the overall global environment has undergone some changes. On the one hand, the global epidemic is gradually returning to normalcy, and production and life in many countries are gradually returning to normalcy. Therefore, each country's import sources are diversified, and they have more choices.
Another one is that the United States, as the world's largest trade importer, has always had a huge demand for imports. However, as the United States tightens monetary policy and liquidity gradually decreases, domestic consumer demand in the United States will gradually slow down. Therefore, not only China, but also other countries' exports to the United States may also decline.
In addition, in recent years, the trade relationship between China and the United States has been relatively delicate, and the United States is also interested in adjusting their sources of trade imports.
Therefore, after considering various factors, China’s orders to the United States are not expected to increase significantly in the short term. The driving force for economic growth must still be focused on domestic investment and consumption. This is probably an important reason why the country issued the “Outline for Promoting Domestic Demand” a few days ago.
Of course, China and the United States, as the world's two largest economies, have always had a very close foreign trade relationship. Even if the United States' manufacturing orders in China decrease in the future, in absolute terms, China will still export a large number of products to the United States every year. At least for some daily necessities, the United States is still relatively dependent on China, so in the long term, there is still a lot of room for growth in trade between China and the United States.
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