A global value chain realignment away from China has yet to occur as the nation’s export machine keeps humming and its purchases from upstream countries including Japan and South Korea remain largely stable, Chinese customs data showed on Monday.
The United States was the biggest buyer of Chinese exports for the fifth consecutive month in August, despite talks of decoupling between the world’s two largest economies.
August shipments to the US jumped 20 per cent from a year earlier to US$44.8 billion, according to South China Morning Post calculations, although China’s total trade with the US fell behind the European Union and Asean nations in the first eight months of the year.
Between January and August, exports to the US dropped 3.6 per cent from a year earlier, while products sent to the EU rose 2.1 per cent and shipments to the Association of Southeast Asian Nations bloc rose 3.7 per cent. The top three markets jointly accounted for about half of China’s total overseas shipments.
Though exports in August surged 9.5 per cent from a year earlier, imports remained sluggish. They fell by 2.1 per cent compared with August 2019, highlighting the uneven nature of China’s economic recovery from the coronavirus pandemic.
Imports from the US declined 2.9 per cent in the first eight months of the year, even as Beijing made efforts to meet its purchasing commitments under the phase one trade deal.
Beijing’s growing trade surplus with Washington – up 27 per cent in August from a year earlier, calculations from the Post show – is bound to grate with US President Donald Trump, who has staked his reputation on closing the gap that he claimed was the “greatest theft in history”.
Despite trade tensions with the US and Australia, as well as coronavirus interruptions, China’s export machine has proven resilient this year, with the August data underlining the world’s reliance on it for medical goods and electronics, both of which grew from a year earlier.
Barclays economists Yingke Zhou, Eric Zhu and Jian Chang wrote in a note that China’s strong August exports reflected “not only further recovery in overseas demand amid unfolding stimulus, but also an ongoing shift in consumer spending to more goods consumption as substitutes for services”.
They concluded that export momentum is set to continue thanks to strong demand for both pandemic related goods such as masks, medical equipment and work-from-home appliances, as well as normal products.
JP Morgan economists Grace Ng, Haibin Zhu and Anita Xu said even as many other countries are still struggling to get the pandemic under control, China is increasing its share in global exports.
While the US, EU, Japan and Taiwan have discussed global value chain realignment to reduce exposure to China following the virus outbreak and trade war, China in recent weeks has redoubled efforts to enhance its role in world trade.
At a massive trade fair in Beijing last week, President Xi Jinping said China would continue to open up its market and promote global trade.
Xi is also expected to preside over a ceremony this week to honour the “heroes” in China’s fight against the pandemic, a chance to declare victory in containing the virus as countries like the US and India continue to struggle.
However, the August data hinted at continued soft domestic demand in China. Imports were down from the EU by 6.8 per cent and Japan by 1.4 per cent. Imports from South Korea declined 4.1 per cent, while imports from Australia plunged by 7.5 per cent year on year in the first eight months, amid an increasingly bitter trade spat.
Imports from Taiwan, meanwhile, shot up 10.6 per cent in the first eight months, though the surge could be partly attributed to one-off purchases from Huawei as the Chinese telecom giant has been hoarding components from Taiwan before new US tech export controls kick in on September 15.
Shanshan Song, an economist at HSBC, wrote in a note that China’s strong exports to the US in August are blessed by improving consumer demand “on the back of strong fiscal support including cash handouts for households as well as some recovery in the labour market”.
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More from South China Morning Post:
- China’s forex reserves rose to US$3.165 trillion in August, but increase less than expected
- China’s exports boomed in August, as trade surplus with the US widened by 27 per cent
- China may ditch US Treasuries as decoupling risk looms: Global Times
- China’s small factory activity strengthened in August thanks to rise in production, new orders, export sales
- Australia’s export surge to China tails off amid rising trade tensions and lower iron ore production
This article China’s export machine keeps humming, despite geopolitical woes and decoupling pressure first appeared on South China Morning Post