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Europe-China Trade Heating Up

As in the United States, European trade is largely heading east to China. According to data released earlier this month by the European Union’s statistical agency, Eurostat, the 27-nation euro-zone reported strong exports to China.

The EU’s exports to China increased from €37 billion (about US$52 billion) in the first half of 2009 to €53 billion (about $74 billion) in the first half of 2010. A broader view also shows that between 2000 and 2009, EU trade with China tripled in value. Regional exports to China rose steadily from €26 billion (about $36 billion) in 2000 to €82 billion (about $114 billion) in 2009, while imports rose from €75 billion (about $105 billion) in 2000 to a peak of €248 billion in 2008 before falling to €215 billion in 2009.

More than 60 percent of the euro-zone’s exports to China during 2010’s first half were machinery and vehicles, the agency said. And not surprisingly, Chinese imports mainly consisted of computers and parts, and mobile phones.

This increase has been especially good for countries like Germany, which was by far the EU’s largest exporter to China, according to Eurostat. The European powerhouse is already seeing significant improvement in its economy, and its unemployment rate is steadily dropping, according to a recent report in The Economist.

The boost in Euro-China trade is even having a positive impact in places like Barcelona, despite Spain’s overall financial weakness. The region’s port is getting a €500 million infusion from Hutchison Port Holdings, a giant Hong Kong-based port investor, developer, and operator, as reported in city government documents. China is the destination or origin of about 25 percent of all the cargo containers moving through the city’s port, according to reports.

What does this mean for electronics companies operating in the region? Generally, the EU’s economic situation is still tenuous, and largely depends on where you are. Ireland, once a booming IT hub, has a troubling banking situation. And, many other nations are confronting high unemployment rates and slow GDP growth.

On the other hand, electronics production in Central and Eastern Europe, which now stands at approximately $85 billion, is expected to grow to $100 billion as contract manufacturers and components companies expand their regional presence, according to a report published this month by Technology Forecasters Inc.

How is your company faring in Europe, and what do you see on the horizon?

6 comments on “Europe-China Trade Heating Up

  1. Barbara Jorgensen
    October 27, 2010

    Arrow Electronics noted on it conference call today that its European business was picking up and expectations were the upswing would continue at least into Q1 2011. The recovery in Europe lagged the U.S., but since September component orders have been increasing and orders are being placed out farther ahead–all of which means Europe is planning to build electronics. Arrow has increased its inventory investment in Europe as well.

  2. Hawk
    October 27, 2010

    Jennifer, I am curious about the balance of trade between China and the euro-zone. Did you get some information on this? In the United States, we've for years imported more than we exported to China but it looks like the reverse is the case for the euro currency zone. Would that be a correct assumptiion and if yes, what is responsible for this and which parts of Europe are benefitting more from higher sales to China?

  3. Backorder
    October 28, 2010

    Well said about the German dominance. Not only has it come back strongly from the recession, it suddenly appears mighty in comparison with other european nations. The recent 'greek' tragedy and the german reaction to it should give us an idea about the power balance in Europe. Also, elaborating on what you said about Germany being the major exporter, I came across one report recently and was surprised to see the gap between germany and rest of euro nations(France, Italy, UK) as far as export to BRIC nations was concerned. While the german share of the total EU export was hovering around 35%, all of its european neighbours were below 10%. In fact, it has been so for the last five years.

  4. Jennifer Baljko
    October 28, 2010

    Thanks for heads up, Barbara. That’s a good sign. And, I saw that Flextronics has opened a new facility in Milan, Italy to provide order fulfillment, forward logistics, and value-added services, initially at least to serve the Italian, Portuguese, Spanish and Swiss markets.

    There was other mixed news this week, too. On the plus side, Reuters today reported that Euro zone economic sentiment improved this month, signaling continued economic growth in the second half of the year, albeit at a slower rate than the second quarter peak. Additionally, Eurostat, the EU’s statistical office, announced Monday that industrial new orders in the Euro zone  were up 5.3% from July to August. Compared to year-ago figures, industrial new orders grew 24.4% in the euro area. On the downside, the region’s composite Purchasing Managing Index, released earlier this month, dropped in October – still expanding, but down from previous levels, according to the same Reuters story and Bloomberg.

    The general sense in the financial press here is that growth will happen at a moderate pace.  Guess that much better than where we’ve been.

  5. Jennifer Baljko
    October 28, 2010

    Hi Hawk,
    Thanks for the question. Like in the U.S., the 27-member EU bloc (which is slightly different than the 16-member euro zone) exports more to China than it imports from there. According to an Oct. 5 report from Eurostat, the EU’s trade deficit with China increased significantly, from €49 billion in 2000 to €170 billion in 2008 and then fell to €133 billion in 2009. During the first half of 2010, imports from China increased from €103 billion to €125 billion, and the trade deficit grew from €65 billion to €71 billion (A PDF copy of the report, “Strong increase in EU27 exports to China in the first half of 2010,” can be downloaded off the Eurostat site).

    For the first half of 2010, Germany was hands down the largest exporter to China, with France and Italy rounding out the top three. No surprise either – Germany was also the largest importer, followed by the Netherlands, the United Kingdom and Italy, according to Eurostat. 

    As for why this is the case, I’m sure there are several reasons. I would speculate that a strong euro plays a substantial role in the trade imbalance; a strong euro makes European products more expensive in the global market. But, I’ll defer to professional economists to enumerate the full list. I found this recent Bloomberg article helpful in explaining some of the current EU economic backdrop. 

  6. Jennifer Baljko
    October 28, 2010

    Hi,

    Thanks for your post. Yes, Germany is a powerhouse to reckon with. Like I mentioned in Hawk's reply, the country is by far the biggest trader with China, and it doesn't surprise me that it may have similar dominance with the other BRIC nations. By the way, can you send over the link to the report you mentioned. Would like to take a look at it, too. Thanks.

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