China-Iran Trade Report (August 2020)
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Another Strong Month for Chinese Exports to Iran, But Iran’s Trade Deficit Expands
New data released by the General Administration of Customs of the People’s Republic of China (GACC) indicate that China exported over USD 800 million in goods to Iran for the second straight month, corresponding to increased confidence among Iranian manufacturers regarding the availability of raw materials and intermediate inputs.
However, Chinese imports from Iran totaled just USD 322 million, the lowest figure over the last 24 months (and likely for many years). After July’s rebound from the June total, declared oil imports fell back to “zero” in August, totaling just USD 387,000. Nearly one-fourth of Chinese imports were comprised of Iranian iron and steel products, which posted relatively strong figures. China also continued purchases of Iranian plastics products, which constituted another one-fourth of the overall import total.
The low level of Chinese imports mean that Iran’s trade deficit—at least as calculated in the Chinese customs data—exceeded USD 500 million in August. Of course, the true deficit is likely lower than the customs data suggests, as the value of Chinese imports of Iranian oil via Malaysia is not counted. Nonetheless, Iran appears to be running a widening trade deficit with a partner with which it once ran a considerable surplus. This will put significant strain on the country’s foreign exchange market.
What Iran needs in order to rein in the deficit is a recovery in its direct oil sales to China. A recent report by Reuters, featuring new data from TankerTrackers.com suggests such a recovery could be forthcoming. TankerTrackers.com has seen an uptick in Iran’s oil exports, observing at least 1.5 million bpd in exports in September. While a significant portion of these exports can be expected to reach China via Malaysia, as has been the norm since May 2019, it is possible that the increase in exports will see Iran’s direct sales recover following the China’s declaration of “zero” purchases in June and in August.
Such an uptick may be the first fruit for Iran’s renewed efforts to upgrade its relations with China and to secure stronger Chinese commitments on trade and investment. Any sales related to oil tankers tracked this month will appear in October’s customs data.
