The Chinese market has been experiencing rapid growth this year, with retail sales leading the way. This is due to a resurgence in consumption following the relaxation of strict COVID-19 restrictions at the end of 2022. The Canton Fair, one of the largest global export and import fairs, has also contributed to this growth. A record-breaking 320,000 business executives from 40 countries attended the fair, hoping to close deals for 2023 and make up for lost sales during the pandemic.
For Irish traders, the Canton Fair has always been a key event for closing deals, with many using it to secure deliveries for Christmas. This year, there was a strong attraction for Ireland’s SMEs trading in the green space, with over 500,000 green and low-carbon products on display.
Despite this growth, Irish exporters to China are facing a sudden lack of interest in their offerings. According to the Central Statistics Office, Irish exports to the market fell by an unprecedented one third across January and February this year. This decline is concerning, especially since exports to China from other EU member states did not fall in the same period. Many exporters believe that Ireland may be part of collateral damage from the rising trade tension between the US and China.
The deteriorating political relationships between the US and China may have reached Irish-based manufacturing facilities, as the vast bulk of the export loss sales has been in computer hardware and peripherals products, mainly associated with US manufacturers located in Ireland. This is worrying for US multinationals supplying into Asia, as they may reassess Ireland’s positioning as an outpost. Additionally, China is pushing all suppliers to the market to switch away from trading in US dollars to their local currency, the Yuan, which could potentially impact Irish exports to the market.
Complicating the picture are the range of China-owned companies with facilities in Ireland that trade extensively internationally, such as Huawei, Tencent, Lenovo, Chinasoft, SATIR, and Firecomms. These companies may be creating tension for US companies in Ireland, who may worry about security risks. Furthermore, the close relationship between Russia and China is a complication, as the EU has deplored what it sees as China’s “pro-Russian neutrality in the aggression by Russia against Ukraine.” If Beijing is found to be furnishing arms to support Vladimir Putin’s war effort, the US, the EU, and Ireland would be confronted by a united anti-China pact on both its diplomatic and commercial relations, and Irish trade with China could well be severed.
Despite the political tension, a peaceful settlement of relationships with China offers the ability to lift global economic growth. The International Monetary Fund (IMF) predicted in April that China’s economy will grow by 5.2% in 2023, indicating that the greatest spillovers will be to countries with strong trade links to China. However, the big worry is that Ireland and its exporters could be the losers, with a potential loss of €12bn in export sales over the next 12 months. A sanguine business review of prospects in China’s market and the country’s commitment to higher-level opening-up is prompting multinationals across the globe to try to expand their presence there. But the political tension is putting a counter-pressure on businesses and creating winners and losers, depending on risk appetite.
In conclusion, the Chinese market is experiencing rapid growth, with retail sales leading the way. However, Irish exporters to China are facing a sudden lack of interest in their offerings, which may be the result of rising trade tensions between the US and China. The deteriorating political relationships between the two countries may have reached Irish-based manufacturing facilities. Additionally, the range of China-owned companies with facilities in Ireland that trade extensively internationally may be creating tension for US companies in Ireland. A peaceful settlement of relationships with China offers the ability to lift global economic growth, but the big worry is that Ireland and its exporters could be the losers if the political tension continues.