The Economist - USA (2022-05-14)

The Economist May 14th 2022 Finance&economics 67

Russia’seconomy

Bearingup

W

ithindaysofVladimirPutin’sinva­

sion ofUkraine, Russia’s financial

systemseemedonthevergeofcollapse.

The West imposed a range of financial

sanctions,notablyontheRussiancentral

bank’s foreign­exchange reserves, that

senttheroubleplungingandledcitizens

towithdrawcashfrantically.Thenthecen­

tral bankraised interest rates, imposed

capitalcontrolsandinjectedliquidityinto

thebanking system, andsomeofthese

misfortunesreversed.Althougha chunkof

Russia’scurrencyreservesremainsfrozen,

thecountrystillgeneratesabout$1bna day

fromitsenergyexports.

Russiahasstoppedpublishingdetailed

monthlytradestatistics.Butfiguresfrom

itstradingpartnerscanbeusedtoworkout

whatisgoingon.Theysuggestthat,asim­

portsslideandexportsholdup,Russiais

runninga recordtradesurplus.

On May 9th China reported that its

goodsexportstoRussiafellbyovera quar­

terinApril,comparedwitha yearearlier,

whileitsimportsfromRussiarosebymore

than56%.Germanyreporteda 62%month­

lydropinexportstoRussiainMarch,and

its imports fellby 3%.Adding up such

flowsacrosseightofRussia’sbiggesttrad­

ingpartners,weestimatethatRussianim­

WhyRussiaisontrackfora record

tradesurplus

Surplus surprise

Russia, total trade with selected countries

Sources:RefinitivDatastream; national statistics

*France,SouthKorea,Turkey and United States

China Germany Italy Japan Other*

15

10

5

0

2019 20 21 22

Imports by Russia, $bn

30

25

20

15

10

5

0

2019 20 21 22

Exports from Russia, $bn

Correction:Ina leaderlastweek(“Theratefate

thatawaits”),wecalledAustralia’scentralbankthe

“BankofAustralia”.Itshould,ofcourse,havebeen

the“ReserveBankofAustralia”.Sorry.

Globaltrade

A slow train

from China

L

ast month a yellow­striped freight

train  rumbled  into  Budapest carrying

solar­power  equipment,  air­conditioning

kit  and  other  bits  and  pieces.  It  had  trav­

elled  for  16  days,  all  the  way  from  Shan­

dong, a province in eastern China. As part

of China’s Belt and Road Initiative, freight

trains now serve more than 50 cities in Eu­

rope  and  Asia  from  Shandong.  They  are

called “Qilu” trains, a nod to the ancient Qi

and Lu kingdoms that flowered in that part

of China in the Confucian era.

China’s  exports,  whether  by  rail,  road,

sea or air, have made rapid progress in the

past two years. They rose by almost 30% in

dollar terms in 2021. Over 5,000 Qilu trains

have  left  the  station  since  2018.  But  in

April,  China’s  export  growth  slowed  to  a

desultory  chug.  In  dollar  terms,  exports

were only 3.9% higher than a year earlier.

Even  that  modest  increase  was  some­

thing of a miracle. It came despite China’s

increasingly  surreal  battle  against  co­

vid­19,  which  has  locked  down  Shanghai,

one  of  the  country’s  biggest  trade  hubs,

and imposed onerous restrictions on mo­

bility  elsewhere.  According  to  Nomura,  a

bank,  stringent  limits  remain  in  41  cities,

accounting  for  almost  30%  of  gdp.Towns

have  been  so  anxious  to  avoid  outbreaks

that officials have sealed lorry drivers into

their cabs while they wait to pick up cargo

at  motorway  checkpoints.  These  kinds  of

precautions have also gummed up interna­

tional trade. In mid­April, 506 vessels were

waiting outside Shanghai’s port, according

to  Windward,  a  shipping­analytics  firm,

compared with 260 in February.

Optimists  had  hoped  that  China’s  ex­

port  machine  could  weather  occasional

outbreaks  of  the  Omicron  variant.  Work­

ers,  they  pointed  out,  could  isolate  them­

selves on the job, living where they work in

a  so­called  “closed  loop”.  But  no  modern

factory  is  entirely  self­contained;  every

“closed” loop must remain open to its sup­

pliers. And if any loop in the supply chain

succumbs  to  the  virus,  it  can  disrupt  pro­

duction in all of them. Tesla’s car produc­

tion  in  Shanghai  has,  for  example,  been

hampered by a shortage of wiring harness­

es  from  a  virus­hit  supplier,  according  to

Reuters, a news agency.

To  increase  trade  by  any  amount  in

these  conditions  is  impressive.  But  the

headline 3.9% expansion reported by Chi­

na’s customs agency on May 9th was more

nominal than real. More detailed statistics,

published later in the month, are likely to

show that the price of China’s exports rose

by perhaps 8% or more in April, compared

with  a  year  earlier,  according  to  ubs,  a

bank.  If  so,  the  volume  of  China’s  exports

must have shrunk last month.

These price increases have raised fears

that  a  locked­down  China  will  exacerbate

inflation in its trading partners, particular­

ly America. The alarm is often exaggerated.

Goods made (in whole or in part) in China

made up less than 2% of American perso­

nal consumer spending in 2017, according

to economists at the Federal Reserve Bank

of  San  Francisco.  China’s  covid­related

bottlenecks  could  have  larger  ripple  ef­

fects, say by allowing rival manufacturers

to raise their prices. Most American infla­

tion, however, is made in America. 

Indeed, China’s exports may be more a

victim  of  America’s  woes  than  a  cause  of

them. America’s slowdown is contributing

to weaker demand for China’s goods on top

of  self­inflicted  disruptions  to  their  sup­

ply. Surveys of purchasing managers have

revealed falling export orders every month

so far this year. And China’s official statis­

tics  showed  declining  exports  last  month

of  the  computers  and  household  appli­

ances that were in such high demand when

the West too was locking itself down. 

Not  everything  is  slowing,  however.

China’s  imports  from  Russia  have  contin­

ued  to  grow  since  Vladimir  Putin’s  inva­

sion  of  Ukraine,  as  sanctions  have  hin­

dered  Russia’s  access  to  Western  markets

(see next story). The offeringsincluded 50

carriage­loads  of  barley,  carriedto  Shan­

dong province on a Qilu train. n

H ONG KONG

An extraordinary export boom

comes to an end