Women walking past a Chanel cosmetics store in Beijing. Consumption is recovering in China, with retail goods sales up 3.3% last month

From "Made in China" to "Bought in China"?

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Hello from Hong Kong where there are rumors of a possible travel bubble with Singapore causing some preliminary excitement over the prospect of travel to an ultimately very similar place.

As in mainland China, where hundreds of millions of local tourists flocked to key locations during the final national holiday of Golden Week, most people are currently stuck within a border. However, this does not apply to the goods they need and it brings us to ours Main piece of the day: China's demand for steel and what that says about its role in world trade after the Covid-19 pandemic.

Policy monitoring explores concerns of UK businesses about the rapidly approaching end of the Brexit transition period during ours Chart of the day addresses the demand for robots as the pandemic turns old ways of working on their head.

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China's steel recovery

In June, something unusual happened to China's steel trade: According to S&P Global Platts, the country became a net importer of the metal for the first time since the 2009 financial crisis.

This is despite the fact that China's steel mills were running at the highest daily production rate ever at the time. The shift from net exporter to importer reflected a rapid recovery in the world's second largest economy, where government supported industrial production and construction is booming at a time when other economies continue to falter in the face of the coronavirus pandemic.

The fast forward to September and the spectacle of imports to China require further attention. Last month, the country imported more goods in US dollars than ever before in its history, beating the previous record of 2018. According to HSBC, imports of steel products rose 160 percent year over year.

Steel, which helped fuel China's recovery from the last crisis, is central to creating this crisis. Investments in real estate increased by 5.6 percent in the nine months to the end of September. The government has sparked a wave of infrastructure spending backed by local government loans.

According to calculations by Mysteel Global, based on official data, the average daily steel production was over 3 million tons per day for four consecutive months. China's share of world production has increased significantly.

This was good news for commodity exporters. Despite its ongoing geopolitical feud with China, which has reportedly hit the coal industry, Australia has shipped vast quantities of iron ore, a key ingredient in steel. As for the metal itself, S&P Global Platts suggested in July that Japan, South Korea, India and Vietnam were "likely beneficiaries" of increased Chinese demand.

China has been a major commodity importer for decades and has accelerated its extraordinary growth. However, the shift in steel caused by the coronavirus – and the country's rate of recovery from the pandemic – suggest the possibility of gradual changes in the country's trade dynamics.

Consumption is recovering in China, with retail merchandise sales increasing 3.3% last month. © Andy Wong / AP

The import boom in September, for example, was not limited to steel and iron ore. Oxford Economics' economists point to an increase in agricultural imports as well as electronic parts. In the latter case, this was partly due to the US trade sanctions stockpiling. According to HSBC, semiconductor imports rose by 28 percent compared to the previous year.

However, as with steel, these data also highlighted the benefits China's recovery will bring to other exporters. In Taiwan, a major electronics manufacturer, exports rose to their second highest level in September. Exports to China rose by more than 15 percent compared to the previous year. Just as China's appetite for steel appears to have surpassed its production rate, demand for other products could fuel further imports into China as the recovery continues.

Thanks in part to this rebound, the renminbi has strengthened more than 4 percent this year – when trading resumed after the recent national holiday in early October, it jumped the most in 15 years.

A stronger currency makes foreign goods cheaper. Consumption is now recovering: retail sales in September rose 3.3 percent year over year, well above the level of another month this year. For other economies struggling to move their goods overseas, China appears to be an increasingly attractive option, especially as stimulus measures to support consumption in the West are curtailed.

It is far too early to point out that the country is on the verge of giving up its status as the world's largest exporter. Even if imports have increased, the share of global exports has hit a record high this year. In September exports rose by 10 percent compared to the previous year. China's trade surplus was $ 37 billion in September.

But if the rest of the world continues to struggle, it is at least possible to envision a major, if gradual, shift in the country's relationship with global trade. The world has learned the expression “Made in China”. It may also need to learn the meaning of “bought in China” now.

Mapped waters

The international trade and production volume in the field of robotics and automation has increased in many countries, contrary to the general downward trend in world trade, writes Valentina Romei. US goods imports fell 11 percent in the first eight months of the year compared to the same period last year, but imports of industrial robots rose 5 percent, according to the US International Trade Commission. This growth was only exceeded by an increase in pharmaceutical imports. The automation and digitization industries are among the corporate winners of the pandemic, which is causing a change in the way companies use technology.

Bar chart of the annual percentage change in US imports from January to August showing that industrial robots have resisted the downward trend

Policy monitoring

Carolyn Fairbairn, Director General of the CBI:
CBI General Manager Carolyn Fairbairn: "It is undoubtedly very serious when we start November without a deal" © Jason Alden / Bloomberg

British business leaders fear that a government campaign on the urgency of Brexit preparations may be too little and too late, as many companies are already struggling to survive the pandemic and are still in the dark about the effects of leaving the EU, write Daniel Thomas and Peter Foster.

Less than three months before the end of the UK's Brexit transition period, the government has launched a new campaign warning companies that time is running out to prepare. Given that companies are focused on weathering the Covid-19 crisis, managers said they had both time and financial leeway compared to last year when the UK had the prospect of leaving the EU without a transition deal were missing.

Companies say they are still lacking the basic information needed to prepare for the likely friction, especially in the case of a no-deal scenario – including a new IT system to pre-declare goods exports, more precisely Rules for VAT and the movement of data.

Carolyn Fairbairn, director general of the CBI, said companies were "struggling to prepare because they don't know what for," referring to research showing that many companies thought the transition period would be extended beyond December 31, undoubtedly very much serious if we start November without a deal, ”she added.

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