Can a Booming Global Economy Go Green?

As the world emerges from the Covid-19 pandemic, China, the U.S., and other top economies are renewing their commitments to green energy.

The world's nenewable energy capcaty increased by 45% in 2020, the largest increased in over 20 years, according to a recent report by the International Energy Agency.

The growth was driven by a 90% jump in global wind capacity, and a 23% rise in solar.

The challenge, as the case of China illustrates, is to allow countries to pursue prosperity for their citizens, while contining to invest in green energy.

The country is likely to succeed in many areas but fall short in others, because, quite simply, it must continue to power gigantic economic expansion, according to an analysis of import and export figures by Trade Data Monitor, the world’s top source of trade statistics.

China’s government has mandated a robust expansion of renewable energy capacity. It is part of a global trend, driven by subsidies, mandates and other policy tools. Global renewable energy capacity increased by almost 280 gigawatts in 2020, the largest year-on-year increased in the last decade, according to the International Energy Agency.

Between 2021 and 2024, China will account for 40% of new renewable energy capacity, the IEA said. China added 92 gigawatts of renewable capacity in the fourth quarter of 2020, triple what it added in the fourth quarter of 2019. The fourth quarter saw a period of robust growth because of policy deadlines in key markets related to targets set by the 2015 Paris Agreement.

However, China’s industrial and manufacturing economy covers such a wide swath of activity that it will always need to consume large amounts of resources, some of which will inevitably be harmful for the environment.

A classic example is steel, of which China is by far the world’s largest producer. A key ingredient in making steel is coke, which is made from metallurgical coal, a high-grade form of carbon. In the first quarter of 2021, for example, China increased coke imports over 250%, to $192.2 million, from $52.5 million in the first quarter of 2020, and $6.8 million in the first quarter of 2019.

Despite China’s industrial dominance, greening the economy is a central goal of Beijing’s 14th Five-Year Plan, which covers 2021 to 2025. "High-energy consumption and high-emission projects that do not meet requirements must be resolutely taken down," Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, told party leaders recently.

And, in pursuing green energy, China has an advantage on the U.S. and Europe, because it is home to so many of the world’s biggest makers of equipment needed to produce renewable energy. China owns five of the world’s six biggest makers of solar panels, and the globe’s top wind turbine manufacturer. China is set to dominate offshore wind markets in 2021, according to the IEA.

The country is the heart of the world’s solar panel supply chain. Chinese imports of solar panels and related equipment increased 40.5% to $7.5 billion in the first quarter of 2021, and Chinese exports of solar panels increased 41.6% to $10.2 billion over that time. For all of 2020, Chinese shipments of the kind of turbines used to power windmills increased 9.5% to $4.5 billion [of exports]. Much of this production, of course, is sold domestically instead of exported.

But China’s biggest challenge besides its large heavy industry is that it is simply growing richer. That means more cars, more computers, and more homes to light. For example, in April 2021, imports of cars and trucks more than doubled year-on-year, rising 154.1% to $5.2 billion.

Overall Chinese imports in April increased 43.1% year-on-year to $221.1 billion, the biggest jump since January 2011. As the global economy recovers from the Covid-19 pandemic, it is a sign that China will play a leading role. Meanwhile, China’s factories are still ticking. Exports in April increased 32.3% year-on-year to $263.9 billion. That bettered predictions by analysts of around 25% and surpassed the 30.7% growth registered in March. With Europe and the U.S. still recovering from Covid, China is also expected to maintain its dominance on global export markets.

All that economic activity needs power, and China has continued to build coal-fired power plants. In 2020, despite the Covid-19 pandemic, Chinese coal imports increased 3.6% to 204.1 million tons. A country always has to keep the lights on.

Time to Focus on Chinese Imports

For years, economists marveled at China’s history-shaping growth in manufacturing exports. But as this April’s trade data from Beijing illustrates, it’s time to start paying more attention to the ballooning of shipments to China.

Chinese imports in April increased 43.1% year-on-year to $221.1 billion, the biggest jump since January 2011. As the global economy recovers from the Covid-19 pandemic, it’s a sign that China will play a leading role. Meanwhile, China’s factories are still ticking. Exports in April increased 32.3% year-on-year to $263.9 billion. That bettered predictions by analysts of around 25%, and surpassed the 30.7% growth registered in March. With Europe and the U.S. still recovering from Covid, China is also expected to maintain its dominance on global export markets.

To be sure, there’s no sign that consumer goods companies are going to flock back to Europe and the U.S. and build factories in Manchester and Cleveland. Chinese imports are focused around three key areas: agricultural goods such as grain, soybeans and vegetable oils; mechanical and electronics that are mostly part of supply chains making products like iPhones; and high-priced consumer items, such as cars and trucks.

China’s biggest increase in imports came from mechanical and electrical products, where it ramped up shipments 28.1% to $93.4 billion. Imports of agricultural goods rose 30.1% to $18.3 billion. And there are signs that its consumers are increasingly able to afford importing high-priced Western goods. Imports of cars and trucks more than doubled, rising 154.1% to $5.2 billion.

But the surge in imports is still good news for multinational corporations who’ve salivated over China’s 1.4 billion consumers since the country joined the World Trade Organization in 2001, because it signals China’s integration in the global economy. It also appears that the trend will soon allow China to pass the U.S. as the world’s number one importer.

The Chinese imports are coming from Asian neighbors. As a bloc, ASEAN countries shipped $31.4 billion of goods to China in April, compared to $13.9 billion for the U.S. The European Union fared better, exporting $26.8 billion to China. Germany led the charge with $10.5 billion in shipments. China imported $18.5 billion from Japan, up 26.7%. By comparison, Chinese exports to Japan increased only 0.6%, a clear sign of how China’s role in the global economy is changing. Increasingly, it’s a buyer as well as a seller.

On the export side, China’s top customer in April remained the U.S., which imported $42.1 billion in April, up 31.3% from April 2020. By comparison, U.S. exports to China rose 51.4%. As a bloc, the European Union came in second, importing $39.9 billion, up 24.5% from April 2020. By individual countries, in second place was Japan at $13.7 billion, up 0.6% from April 2020. In third place, surprisingly, was Vietnam, which imported $12.8 billion, up 49.8% from April 2020. A large portion of this trade is part of supply chains and is destined for reexporting, but much of it reflects Vietnam’s emergence as a prosperous economy, and one of the powerhouses of Asia, an important trend to watch.

As the global economy recovered from Covid-19, Chinese exports were up across the board. In a sign that industrial activity is recovering, exports of steel products increased 55.8% to $7.4. billion. Mobile phone shipments rose 37.9% to $11.1 billion. Shipments of high-tech products increased 25.2% to $76.1 billion. One outlier was textiles, where exports shrank 16.6% to $12.2 billion.

The big trend that shaped global trade during the Covid-19 pandemic was a jump in trade in anything people used to work from home, from laptop computers and furniture, to toys and lighting. Those purchases appear to remain steady so far in 2021. Chinese exports of toys increased 69.3% to $3 billion. Furniture was up 60.7% to $6.2 billion. But at the same time, consumers, assisted by generous government stimulus packages, are starting to also buy products they use when they leave the house. Chinese footwear exports increased 59.4% to $3 billion. The upshot: The global economy appears to have staged a successful comeback.

Global Rubber Industry Booms After Covid

The Covid-19 pandemic reordered the global economy as billions of people learned to work from home, crippling demand for everything we use to get around, from shoes to petroleum. One of the commodities that got whacked by Covid in 2020, because it is so tied to the automotive industry, and is now staging a comeback, is rubber.

Shipments of tires, gloves, tubes, hoses, conveyor belts, and other rubber products are trending up this year after sharp declines in shipments and prices in 2020, according to an analysis of first-quarter trade data by Trade Data Monitor, the world’s top source of trade statistics. 

The world number one importer, the U.S., reported rubber imports up a whopping 34.6% to $9.1 billion in the first quarter of 2021, as Americans bought new car tires to get back on the road, rubber gloves to protect themselves from Covid, and new rubber-soled shoes to walk around as pandemic restrictions taper off.

The world’s top exporter, China, reported shipments of rubber up 65% in the first quarter of 2021, exporting $7.3 billion, up from $4.4 billion in the first quarter of 2020. China’s top customer, the U.S., more than doubled its orders, buying $1.3 billion worth, compared to $418.6 million over the same time period in 2020. 

Over half of all Chinese rubber shipments -- $3.9 billion worth -- of those exports were in the form of tires for cars. But China also increased shipments of conveyor belts (up 36% to $244.9 million), which are crucial components of e-commerce; tubes, pipes and hoses, often used in automotive (up 49% to $269 million); and rubber gloves (up 1,241% to $1.1 billion).  

It wasn’t just China. In the first quarter, the world’s number two exporter, Thailand, increased rubbed exports 36% to $5.3 billion. Although Thailand exported $1.5 billion of tires, it also shipped out $1.4 billion of natural rubber, a raw material. 

In 2020, natural rubber, which is harvested from trees, accounted for around 46% of global rubber productions. The rest was synthetically produced from petroleum byproducts, a technology spurred by rubber shortages during the 20th century’s two world wars. 

Rubber is used to make everything from shoes and toys to golfs balls and condoms, but the biggest driver of the global rubber trade is still car and truck tires. That industry got hammered by Covid. In 2020, imports by the U.S., the world’s top consumer, fell 9.8% from 2019 to $13.2 billion from $14.6 billion. Americans weren’t driving as much, so they didn’t need to replace their tires. This trend, enacted around the world, decimated global rubber trade in 2020.  

In the first quarter of 2021, U.S. consumers got back on the road, and tire imports increased 4.7% to $3.6 billion.  

Overall, during that time, U.S. rubber imports increased 34.6% compared to the year before, rising to $9.1 billion from $6.7 billion. A big chunk of that increase came from shipments of rubber gloves, which more than doubled, to $2.6 billion from $613.2 million. The U.S. is the world’s top rubber importer, shipping in $27 billion worth in 2020.  

The U.S.’s top suppliers of rubber were Thailand ($4.1 billion), China ($2.8 billion), and Malaysia ($2.8 billion). The U.S. buys rubber from a wide variety of sources, ensuring that it will have stability of supply. It imported over a billion dollars’ worth of rubber from eight different countries.  

The only rubber item to buck the downward trend in 2020 was gloves. U.S. imports exploded to $4.1 billion in 2020, from $2.3 billion in 2019, a 78% increase.  

A resurgent rubber import market suggests that the U.S. industrial economy is stabilizing. U.S. imports of rubber tubes, pipes and hoses increased 0.7% to $267.7 million in the first two months of 2021, after falling 17.7% to $1.4 billion in 2020.  

China was the world’s only major economy to expand in 2020. It increased rubber exports 1.7% to $22.5 billion. It shipped over a billion dollars to only two trading partners, the U.S. and UK., meaning that its producers enjoy a wide, global customer base.  

However, Malaysia, the world’s fourth biggest rubber exporter, delivered the best performance in 2020, increasing rubber exports 58.1% to $11.2 billion. Thailand and German were the world’s second and third biggest rubber exporters in 2020, and the U.S. was fifth.