China's trade surplus surged to historic highs during the Pandemic as people consumed more goods than before, but analysts say the Russia-Ukraine war will change that.
The Asian manufacturing giant's trade surplus could fall to $238 billion this year, about a third of what it was last year.
The war in Ukraine will affect net trade because of softer foreign demand and a higher import bill, according to a senior China economist at Capital Economics.
The global economy could be affected by the war, according to an economist.
The European Union is China's second-largest trading partner, accounting for 15% of the Asian country's total exports. China's exports to the EU increased by 16% last year, making up 30% of the country's growth.
Wang said that the EU's economic growth has a high correlation with China's total export growth.
Russia's war in Ukraine is set to disrupt supply chains, even though the shortage of semiconductors was already severe.
The conflict has worsened the global shortage of chips, which China is heavily reliant on for its electronic exports. The research firm said that China's 30% export growth in 2021, was due to the exports of electronic items.
Russia and Ukraine play important roles in global supply chains.
Neon and krypton are essential in making semiconductors and are supplied by Ukraine. It also makes precious metals used in electronics.
According to a report published Monday, China is vulnerable to commodity shortages caused by the war. The report said that China is sensitive to disruptions in nickel supplies.
The London Metal Exchange halted trading of nickel last week due to supply disruption fears. Russia is the third-largest producer of nickel.
China is the largest producer of electric vehicle batteries in the world. The number of electric vehicles it exported to other countries jumped 2.6 times last year, more than any other country in the world.
A study found that China-made electric vehicles accounted for nearly half of all electric vehicles manufactured from 2010 to 2020.
Last week, oil prices soared to record highs, before tumbling more than 20%. China is the world's largest oil importer.
Nathan and Samuel said that China imported $423 billion worth of energy products last year. The bulk of that was crude oil.
If average oil prices go up to $110 this year, China's nominal GDP will be cut by 0.8%.
After spiking to highs of over $130 last week, the price of oil dropped below $100 per barrel this week. At the beginning of the year, crude was trading between $70 and $80 a barrel.
China could find some relief if it leaned on Russia.
China can partially offset the higher energy prices with cheaper imports from Russia.
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