British cars drive a mini-export boom to China


British cars drive a mini-export boom to China

Can we shift up another gear?

Economic Analysis

06 August 2012

Executive summary

  • Driven by demand for luxury vehicles, UK exports to China have grown by 20%y/y in the first five months of 2012
  • China remains a minor export market for the UK as we don’t produce what they want to buy at their stage of development. But other sectors can repeat the UK’s success in car exports. This can be aided by the rebalancing of China’s economy towards consumption, growing demand among increasingly affluent Chinese for the goods and services in which Britain excels, and the likelihood of a stronger Chinese currency

Britain’s exports to China have been growing quickly in 2012…

The UK’s exports to China grew by more than 20%y/y in the first five months of this year - almost twice as fast as exports to other non-EU markets and at a time when exports to the EU fell (Charts 1 and 2).

 

Chart 1: Growth in UK exports, EU & non-EU (%y/y)

Source: HMRC, Group Economics

 

Chart 2: Growth in UK exports, total & China (%y/y)

Source: HMRC, Group Economics

This success isn’t new. Despite the relatively low starting point, growth in exports to China has significantly exceeded the growth rate of total UK goods exports in every year since the financial crisis (Chart 2). A decade ago China accounted for less than 1% of UK exports. Today it’s more than 3%. While still small – it accounts for less than either Ireland or Belgium – China was the only emerging market in the UK’s top 10 export destinations in 2011.

…driven by cars…

In general, the UK doesn’t produce the goods that China’s wants to buy at its current stage of economic development. But one product that China’s growing middle class craves is cars. With high demand for luxury vehicles, UK produced brands – such as Jaguar Land Rover – are driving the UK’s mini Chinese export boom. Growth in motor vehicle exports to China more than doubled in the first five months of 2012 (Chart 3) continuing a recent run that has seen vehicle exports perform strongly relative to the growth in total goods exports to China. Vehicle exports now account for a third of all goods exports to China, from almost zero a decade ago (Chart 4).

 

Chart 3: Growth in UK vehicle exports to China vs. China passenger car sales growth (%y/y)

Source: HMRC, Datastream, Group Economics

 

Chart 4: Share of vehicles in total exports to China (%)

Source: HMRC, Group Economics

Latest news

Royal Bank of Scotland hosts ‘Easy Wins Live’ event

The event explored today’s ‘always on’ world and the pressure Scots face as they struggle to balance life inside and outside of work.

To win the fight against fraud and scams, it is vital to educate young people.

Primary school children in Currie, Edinburgh put on their detective hats last week to learn more about fraud and scams thanks to the Royal Bank of Scotland MoneySense programme. Les Matheson, CEO of Personal Banking, tells us why it’s so important to financially educate young people.

New NatWest debit cards now accessible for all customers

New card features are being rolled out from today with all cards having a notch and raised dots.

Set Tab for lightbox