Chinese exports rose in May at the fastest pace in more than a year, the government said Friday, as a flood of appliances, cars and electronics rolled out of factories and the prospect of a global reaction was growing.
The value of Chinese exports increased by 7.6% compared to May 2023, even as prices of many manufactured goods from China fall.
China is rapidly building new factories and expanding existing ones as part of a national strategy. But Chinese household spending is weak, due to a long and increasingly steep decline in the prices of their apartments.
Much of the factories’ excess production is exported. Fewer Chinese families are buying new apartments, for example fewer household appliances are being sold in the country. The government said the export value of household appliances increased by 18.3 percent in May compared to the same month of the previous year. And because demand is so low in China, prices for appliances have fallen. The actual number of devices exported last month increased by 27.8 percent.
China’s trade surplus, the difference between what it earns from selling goods to the world and what it spends on imports, increased in May to $82.6 billion. This represents an increase of 25.6 percent compared to the previous year. This is the biggest May on record and one of the highest months on record, except during the pandemic, when China exported huge quantities of medical equipment, exercise equipment and other manufactured products.
China’s trade surplus tends to be quite small in May and much higher later in the year, when its exporters are supplying goods for the Christmas period.
The quantity of many exports, not just household appliances, has grown faster than their value. So many containers full of goods are leaving China, and fewer containers are returning with imports, that shipping companies are running out of containers in China.
The value of Chinese imports increased by only 1.8 percent in May.
Chinese companies are starting to face more trade barriers. On May 14, President Biden increased tariffs on approximately 4% of Chinese exports to the United States. The European Union is expected to decide next week whether to impose tariffs on Chinese exports of electric cars. Developing countries like Brazil and India are also taking steps to protect their factories and industrial workers from Chinese competition.
China announced Friday that the export value of trucks and cars increased 16.3% in May from a year earlier. The breakdown between gasoline cars, electric cars and diesel trucks is usually released later in the month.
The increase in customs duties does not yet appear to have harmed Chinese exports and could even be useful in the short term. Some Chinese companies rushed to send goods to emerging markets in Latin America and elsewhere before tariffs could take effect.
Last year, China ramped up exports to Vietnam and Mexico, where goods can be reprocessed and then shipped to the United States or Europe with low or no tariffs. These more complex trade routes, combined with China’s weak exchange rate, could reduce the effectiveness of tariffs, said Capital Economics, a research firm.
“Even once tariffs are in effect, their impact could be mitigated through trade rerouting and exchange rate adjustments,” the company said in a research note.
China’s growing surpluses are helping to offset a weak domestic economy.
Chinese consumers’ reluctance to spend is clearly visible on the streets of Shanghai and Beijing. Many restaurants in Shanghai and Beijing are empty even on weekend evenings. The stores have few or no customers and the shopkeepers seem bored. Cheap cosmetics made in China are crowding out more expensive foreign brands, and sales of spirits have faltered as consumers buy beer instead.
The United States announced this week that its trade deficit widened significantly in April to $74.6 billion. JP Morgan said in a research note that the country’s trade deficit will likely eat into its economic growth this spring, shaving nearly a percentage point off the April-June growth rate. The U.S. economy grew 1.3 percent annually in the first three months of this year.
Read you contributed to the research.
