Understanding China's recent export strength
China's exports grew by 9.5% y/y in August, beating market expectations again. Recent export strength has been driven mainly by shipments to developed markets, including the US. Product wise, protective equipment and medical equipment, as well as electronics products were the predominant drivers of China's export strength. Why has China been able to gain market shares globally and even in the US? Timing and base effect matter – China was hit by and came out of Covid-19 first, and exports to the US declined sharply in 2019 due to the trade war. In addition, China's supply chain resilience and adaptation to supply chain restructuring may have helped, as evidenced by its exports to Taiwan and Vietnam. Going forward, China's exports should benefit from a gradual recovery in global demand but may face increased competition as other producers come back online. We now expect China's 2020 exports to come in largely flat from the 2019 level, as export growth stays in the low-mid single digits for the rest of 2020.