China’s exports grew at the fastest pace in more than a year in May as a flood of appliances, cars and electronics rolled out of factories, the government said on Friday, raising the prospect of a strong reaction around the world.
China’s exports increased by 7.6% compared with May 2023, even though prices of many manufactured goods exported by China fell.
AsNational strategyAs part of its economic recovery, China is rapidly building new factories and expanding existing ones. But household consumption is weak as the prices of the properties they own have been falling for a long time and at a steeper rate.
Much of the increased factory output is exported to other countries. For example, as fewer Chinese families buy new homes, domestic sales of home appliances have also fallen. The Chinese government said that in May, exports of home appliances increased by 18.3% from the same period last year. Due to weak demand in the Chinese market, home appliance prices have also fallen. The actual number of home appliance exports increased by 27.8% last month.
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China’s trade surplus, the difference between what it earns from selling goods around the world and what it spends on imports, widened to $82.6 billion in May. That’s up 25.6% from a year earlier. It was the largest trade surplus ever recorded in May and one of the largest months outside the coronavirus pandemic, when China exported large quantities of medical devices, sports equipment and other manufactured goods.
China’s trade surplus tends to be quite low in May and much higher in the second half of the year, when Chinese exporters are supplying goods for the Christmas season.
It’s not just home appliances. The volume of many export commodities has increased faster than the value. More and more containers full of goods are leaving China, while fewer and fewer imports are being shipped back to China, so much so that shipping companies are running out of containers in China.
In May, China’s imports grew by only 1.8%.
Chinese companies are beginning to face more trade barriers. U.S. President Biden imposed tariffs on about 4% of Chinese exports to the U.S. on May 14. The European Union is expected to decide as early as next week whether to impose tariffs on Chinese electric vehicle exports. Developing countries such as Brazil and India are also taking measures to protect their factories and industrial workers from Chinese competition.
China said on Friday that exports of trucks and cars rose 16.3% in May from a year earlier. Breakdowns for gasoline, electric and diesel trucks are usually released later in the month.
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The higher tariffs don’t appear to have hurt Chinese exports much yet and may even help them in the short term. Some Chinese companies have already shipped goods to emerging markets in Latin America and elsewhere before the tariffs take effect.
Over the past year, China has stepped up its efforts to route exports to Vietnam and Mexico, where goods can be reprocessed and shipped to the U.S. or Europe with low or no tariffs. These more complex trade routes, combined with a weaker Chinese currency, could reduce the effectiveness of tariffs, according to research firm Capital Economics.
“Even if tariffs take effect, their impact could be mitigated through trade rerouting and exchange rate adjustments,” the firm wrote in a research note.
China’s growing surplus is helping to offset weakness in the domestic economy.
On the streets of Shanghai and Beijing, Chinese consumers’ reluctance to spend is clear. Many restaurants in the two cities are empty even on weekend nights. Stores are empty or empty, with bored clerks standing around. Low-priced Chinese-made cosmetics are crowding out pricier foreign brands, and sales of hard liquor are falling as consumers opt for beer.
The U.S. reported this week that its trade deficit widened sharply in April to $74.6 billion. JPMorgan Chase said in a research note that the U.S. trade deficit is likely to erode its economic growth this spring, reducing the growth rate from April to June by nearly a percentage point. The U.S. economy grew at an annualized rate of 1.3% in the first three months of this year.