Chinese exports recovered in May, boosted by a tapering off of antivirus restrictions and higher prices in the U.S. and Europe.
Overall, Chinese exports rose 16.9% year-on-year to $308.3 billion, after increasing only 3.9% in April. Monthly imports increased 4.1% to $229.5 billion, over the 0.0% figure for April. The performance beat analysts’ expectations for May.
With the Covid restrictions, it’s been difficult for economists to gauge what’s going on with China. Analysts have said that economic growth in 2022 could be as low as 2%, below the government’s 5.5% target, but May’s trade performance, which beat analysts’ expectations, suggests a better outcome for the year.
One big reason: consumers in other Asian countries.
The renewed prosperity in Chinese trade has accentuated the battle for markets. The world’s been polarizing into three big groups: Asia, U.S.-European Union, and the South; Latin America and Africa.
In Asia, Chinese manufacturers have set up increasingly elaborate supply chains, in part to reduce labor costs, and in part to hedge against punitive tariffs imposed by the U.S. and other countries.
But now, Asian countries are likely playing another important role in the Chinese economy. Its consumers are buying more of the computers, clothes and cars the Chinese export machine is pumping out.
Exports to members of the ASEAN countries rose 25.9% year-on-year in May to $49.3 billion, while imports from ASEAN countries fell 2.5% to $32.5 billion, suggests that the trade was based largely on consumption, not supply chains.
By comparison, exports to the European Union increased 20.4% to $48 billion, and exports to the U.S. rose 15.9% to $52 billion. Imports from the U.S rose 21.1% to $15.9 billion, and imports from the EU fell 9% to $24.8 billion.
One part of the world that is not buying Chinese exports because its people are running out of money: Russia. Exports to Russia fell 8.5% to $4.3 billion, while imports from Russia, almost all gas and oil, rose 78.1% to $10.3 billion.
One industry that keeps growing and will be supplying the rest of the Asia, taking away markets from U.S. and European companies, is automotive. Chinese truck and car exports rose 47.4% to $4 billion.
Other mainstays of China’s export machine appeared to recover. High-tech exports rose 4.5% to $76.1 billion. Toy exports increased 33.1% to $4.2 billion. Mobile phone exports rose 14% to $11 billion. Footwear exports rose 49.7% to $5.1 billion. A lot of people are still only now getting going again, and spending less time at home, after quarantining during Covid. Shipments of household appliances fell 8.2% to $7.6 billion.
Inflation continues to play a distorting role in trade statistics that needs to be understood to properly gauge what’s going on.
For example, iron ore imports rose 3.6% to 92.5 million tons by quantity, suggesting a recovery in Chinese industrial activity, but fell 24.1% to $12.9 billion by value as prices dropped at the beginning of May. Soybean imports increased 27% by value to $6.5 billion but only increased 0.7% by quantity to 9.7 million tons. Grain imports rose 26.9% to $8.9 billion by value, but only 0.2% to 15.9 million tons by quantity.
One sign that China is worried about its food supply and is focusing on keeping crops plentiful at home: Fertilizer exports shrank 54.4% to 1.7 million tons.
Meanwhile, China’s imports are mainly focused on some commodities, such as iron ore and copper, and high-value products increasingly essential to its booming middle class. Pharmaceutical imports rose 24.3% to $4.5 billion.