Exports to China increase 31 percent in July-April

ISLAMABAD: Pakistan’s exports to China increased 31 percent to $1.9 billion during the first 10 months of the current fiscal year, according to the ministry of commerce.

Commerce Adviser Razak Dawood attributed this growth to the implementation of second phase of the free trade agreement between China and Pakistan. On his Twitter handle, Dawood said the second phase of Pakistan-China FTA became operational on 1st January, 2020.

“MOC [ministry of commerce] is glad to share that during July-April 2021 our exports to China have increased by 31 percent to $1.951 billion from $1.491 billion in the corresponding period last year,” the adviser said. “The exports increased by $459 million during this period. This shows that our FTA-II is working for which the credit goes to our exporters.”

Pakistan Business Council CEO Ehsan Malik said the base effect of a COVID affected April 2020 also contributed to the spike. “Indeed, the overall 10-month data to April for reasons of base effect is better than the 9 month data,” Malik added.

The second phase of the CPFTA spanning 2019-2024 was finalised between the two countries in early 2019 and entered its implementation phase from January 1, 2020. In 2007, China and Pakistan implemented the first phase of the China-Pakistan free trade agreement

The CPFTA received widespread criticism amongst business groups in Pakistan, who believed that Pakistan had negotiated poorly, both in terms of getting access for the products for which it was better placed to export to China, and also in terms of granting access to Chinese goods that were perceived to have inundated the Pakistani market, contributing to premature de-industrialisation.

According to the State Bank of Pakistan, the United States was the biggest export market for Pakistani companies that earned $3.56 billion in proceeds during the nine months of this fiscal year, compared with $3.1 billion in the corresponding period of last year, showing an increase of 15 percent.

Pakistan exports to the US rose to $484.4 million in March from $402.1 million in February and $342.5 million a year ago. The UK was the second biggest buyer of Pakistani goods at $1.5 billion in July-March FY2021, up 18 percent over $1.28 billion in the same period last year.

The SBP’s data showed that the country’s total exports in July-March FY2021 stood at $18.6 billion up 2 percent in value. Exports to China increased eight percent to $1.4 billion. Pakistan merchandise exports to Germany rose nine percent to $1.13 billion. Exports to the Netherlands increased seven percent to $830.4 million.

Exports, however, to Spain and Italy declined by 13 percent and six percent, respectively. Outside Western Europe, the greatest declines were in exports to Bangladesh 24 percent and the United Arab Emirates 16 percent.

Malik said the common reason for Pakistan’s overall export performance and country wise growth dispersion is COVID-19. “Pakistan came out of its first lockdown earlier than its regional competitors and was able to respond quicker to rising demand in the UK and US, the two countries that are more advanced on vaccinations and where retail business is opening at a faster rate than elsewhere in Europe,” Malik said.

Pakistan’s textile exports remain largely cotton-based whilst the fastest growing segments of global demand are of apparel made from man-made fibres. This is also a reason why Pakistan has not fully benefited from EU GSP+ tariff free access.

Saad Hashemy, an executive director at BMA Capital said the country's exports are expected to improve going forward due to recovery post Covid both in Pakistan and the rest of the world.

“It is encouraging to see countries like the US and UK that have started to lift Covid related restrictions and this should translate to improved economic activity in these countries, which should result in better exports for Pakistan,” Hashemy said.