China's semiconductor and IC imports have slumped. Why on Earth could that be?

It looks like sanctions – and economic chills – are biting as total trade with EU, US and Japan declines

China's imports of semiconductors and integrated circuits plunged year-on-year for the first two months of 2023, at a time when the country is exiting COVID restrictions and the US is enforcing industry sanctions.

Data released Tuesday by China Customs showed integrated circuit imports declined by 26.5 percent to 67.58 billion items – collectively valued at $47.2 billion – across January and February 2023.

Meanwhile, The South China Morning Post reported import volumes of semiconductors saw the biggest dip of all products disclosed by Customs, declining by 45.1 percent.

China's imports of ICs declined in 2022 for the first time since at least 2004. According to Bloomberg, 2021 saw the imports grow by 17 percent, 2020 by 22 percent, and 2019 by 6.6 percent.

The customs report is the first major economic data released since China abandoned its zero-COVID policy and reopened its economy.

The data may reflect the impact of US restrictions on the export of semiconductors to China. The US has also struck agreements with allies – including South Korea, the Netherlands and Japan – to have their semiconductor-centric businesses restrict activities in China.

According to the customs report, imports and exports to the EU, the United States, and Japan declined during the period. China's largest trading partner was the ASEAN bloc, accounting for 15.4 percent of China's total foreign trade value across all industries and a year-on-year increase of trade by 9.6 percent.

Its second-largest trading partner was the EU, in which China decreased its total trade value by five percent. In third place was the US, which dropped by 10.6 percent, followed by Japan which decreased trade value by 5.7 percent.

Total exports for China were down by 6.8 percent for the first two months of 2023 to $506.3 billion. Imports were down 10.2 percent to $389.4 billion.

China's monthly exports have been on the decline since October 2022.

"Against the backdrop of geopolitical conflicts and interest rate hikes by many countries, the economic growth prospects of major countries have deteriorated compared with last year. This will cause a decline in overseas demand, which means lower demand for China's exports," explained Chinese state-sponsored media.

China Daily also said that during the pandemic "the economic stimulus policies of major Western economies mainly focused on protecting demand, while China's policy mainly focused on protecting the supply side." ®