The Chinese Communist Party announced yesterday (9th) that exports in April have shown signs of “recovery”. Analysts attribute this to the low base effect from last year. However, China’s export growth to major developed economies is still in a year-on-year negative growth state, drawing attention once again to conflicts with the West due to the dumping behavior caused by overcapacity. Experts believe that the severity of China’s internal economic problems is the key issue.
According to data released by the General Administration of Customs of the People’s Republic of China on May 9th, China’s total export value in April amounted to $292.45 billion, a year-on-year increase of 1.5%; total import value was $220.10 billion, a year-on-year increase of 8.4%; and the total value of imports and exports reached $512.56 billion, a year-on-year increase of 4.4%.
In March this year, the total export value was $500.81 billion, a decrease of 7.5% compared to the previous year, but export performance showed signs of improvement in April. American economist Davy J. Wong stated on May 10th that last year, China’s economy had just begun to recover after the zero-clearance policy ended, so at that time, the overall economic export base was relatively low, contributing to the current growth due to the low base effect.
Chinese trade expert Wang He mentioned that China’s total import and export trade value exceeded $4 trillion (US dollars) in 2013 and had been hovering around that level. In 2021, it reached $6 trillion, which remained stable in 2022 but experienced a significant decline in 2023, dropping below $6 trillion.
Wang He expressed that looking at the current situation, China’s import and export trade remains unstable, as export was still declining as of March, with a growth only observed in April according to official Chinese data. Whether this growth is sustainable remains to be seen.
According to the Securities Times, China’s total import and export value in April increased by 2.3% month-on-month, with exports increasing by 4.5%.
The affluent markets of Europe and America are crucial regions for China’s economic development. However, data from the General Administration of Customs showed on May 9th that in April, China’s export growth to major developed economies was still in a year-on-year negative growth state, with only a slight improvement in the rate of decline. In April, exports to the United States, the European Union, and Japan decreased by -2.8%, -3.6%, and -10.9% respectively year-on-year, continuing the trend of negative growth since the beginning of the year.
The growth in April’s exports was driven by trade with Asia and developing countries. According to Chinese data, ASEAN remains China’s largest trading partner. In April alone, China’s exports to ASEAN increased by 8.1% year-on-year in US dollars, a 14.4 percentage point increase from the previous month; while from January to April, exports to ASEAN grew by 6.3%, significantly higher than the overall export growth of 1.5%.
Wang He stated to Epoch Times that Western countries are reducing their risk exposure to China, leading to a continuous decline in China’s share of foreign trade.
Davy J. Wong indicated that Europe and America are the main sources of profit and growth for Chinese enterprises, while exporting to Asian, African, and Latin American countries results in lower profitability and value-added, with little enhancement to the overall profitability of Chinese export enterprises, possibly even leading to a decline.
“The decline in China’s exports to Europe and the United States, while both markets currently show optimistic conditions, suggests a decrease in the competitiveness of Chinese goods.”
So far this year, China’s overall economy has stagnated, and officials have been emphasizing the “bright economic outlook.” After the trade data showed signs of improvement in April, official propaganda highlighted that “China’s commodity trade volume grew by 5.7% in the first four months of this year.”
Wang He stated that the current slight rebound in foreign trade may give the Chinese authorities some illusions, making them believe that their export-oriented policies are effective, leading to further efforts to promote the development of the manufacturing industry. This could exacerbate conflicts with the West over China’s surplus production capacity, putting China in a more passive position.
“By increasing exports and boosting the manufacturing industry, China’s internal economic structure becomes even more imbalanced. This will deepen China’s economic woes.”
Data shows that April’s export growth was still about quantity rather than price. China’s exports still heavily depend on low prices for progress. According to The Paper, the derisory speed of export price increases was a significant drag on negative export growth in 2023, and the narrowing rate of the Producer Price Index (PPI) in recent months has fallen short of expectations.
Wong explained that due to tensions in US-China trade relations, resistance to Chinese goods in Europe and America, and China’s economic development mainly driven by exports, industries like real estate and consumer goods have become export-oriented services. This shift, where the growth in export business is not driven by increased prices, results in declining profitability, posing a negative factor for economic recovery and growth.
China’s export dependency is increasingly on the automotive industry. In April, the export volume of automobiles (including chassis) increased by 32.4% year-on-year, with export value up by 28.8%. In the first four months of 2024, China’s automobile export volume grew by 21% compared to the same period in 2023.
Wong pointed out that not all electric cars exported from China to Europe and America are Chinese brands. For instance, Tesla accounts for over 40%, with some Korean and Japanese cars also being manufactured in China; therefore, the actual data may need to be reduced by around 50%.
“At present, the production of electric cars being exported from China to Europe and America is high due to government subsidies, though actual sales and exports are not necessarily ideal. For example, BYD’s sales in Germany are only around 12,000 units, or even just a few thousand units in six months, which is relatively low in quantity.”
Leaders in Europe and America are closely watching the surge of cheap Chinese exports in industries like electric vehicles, fearing potential oversupply issues, while Chinese leader Xi Jinping recently visiting France did not acknowledge this concern.
In October last year, the EU launched an anti-subsidy investigation on new energy vehicles imported from China, which is slated to complete within 13 months from the initiation or impose provisional tariffs in July this year.
Recently, Reuters reported that US President Biden is expected to announce new tariffs on strategic industries including electric vehicles from China next week.
Wang He mentioned that the US is gearing up for a tariff war with China, and the EU is likely to follow suit, while the US might also collaborate with Mexico to take measures against Chinese products. From this perspective, the sustainability of China’s foreign trade rebound in April is questionable because “just a month’s fluctuation in trade data cannot change the larger trend of China’s economic (instability).”
Wong noted that there are several issues with China’s economy at present. Based on the analysis of Chinese export data, business profitability is on the decline. Simultaneously, the pandemic has eroded residents’ savings and consumption capacity over the past few years, with the authorities not significantly reducing taxes or increasing benefits, leading to a relatively weak consumer market. Additionally, real estate has been a primary source of investment and wealth for residents, but with falling house prices currently, the industry’s overall situation is quite negative.
“Now, in addition to oversupply in traditional industries, the reckless growth in industries like fake new energy vehicles will also contribute to oversupply. Some traditional industries that truly need government support, including manufacturing and real estate, receive very little assistance, while local governments face financial difficulties due to the past pandemic preventing them from being able to repay debts, leading to China’s financial crisis becoming increasingly severe,” he stated.