Chinese Export Boom is Redrawing Global Economy

Buoyed by a rebounding economy as the U.S. and Europe continue to struggle with containing the coronavirus, China reported shipments of $268 billion, a stunning 21.1% increase from November 2019, almost twice the year-on-year gain in October. Analysts had predicted similar growth this past month.

China’s 2020 boom in exports is beyond a statistical blip, according to analysis by Trade Data Monitor, the world’s top source of export and import statistics. The country is now exporting more goods per month in dollar value than any country in global economic history.

The bonanza is driven by the Covid-19 pandemic. As hundreds of millions of people in the world’s richest economies migrate their work home from the office, they are doing so with China-made computers, phone, routers and data storage units. Overall, exports of high-tech products leapt 21.1% to $86.1 billion.

Hospitals, pharmaceutical companies and public health officials are buying medical equipment they need, such as ventilators, face masks, and now many key ingredients for mass-produced vaccines, from China. Exports of medical devices increased 38.4% to $1.6 billion.

As the rest of the world has had to shut down major sectors of the economy to cope with Covid-19, China has kept its factories open since the spring. China’s top customer: the U.S., which imported $52 billion of goods, up 45.7% from November 2019.

To be sure, China’s hot streak won’t last forever. Markets will get saturated. Countries will slow down their purchases of medical supplies as populations get vaccinated. The yuan has been appreciated in value for much of the decade. Chinese wages have been rising, pushing parts of the supply chains toward other Asian countries, especially Vietnam. China’s widening trade gap will continue to trigger protectionism and tariffs. And the rest of the world will get back to work.

But for now, China is the only rich economy expected to grow in 2020, according to the International Monetary Fund. China’s manufacturing index has been robust, indicating that factories are humming. By comparison, U.S. exports have fallen almost 15% in the first 10 months of 2020. Japan’s are down 11.7%.

Meanwhile, China has blown through all the records, notching its sixth straight month of growth. Thanks to exports, China now appears almost certain to reach its goal of becoming the world’s biggest economy by 2030 ahead of schedule.

The change in consumer habits isn’t just visible in sales of high-tech products. People are buying less stuff they need to move around—and simply more they need to stay at home. Shipments of bags and containers fell 8.3% to $2.1 billion, and shoes, boots and footwear declined 8.8% to $3.2 billion, while China exported $6.9 billion of furniture, up 42.7% from the same month in 2019.

In high-tech goods, China isn’t just exporting finished products. Sales to other countries of integrated circuits grew 26.4% to $11.5 billion.

Economists have looked to Chinese consumers to pick up some of the slackening demand, but imports are not keeping pace with exports. Imports increased 4.5% year-on-year in November, furthering widening China’s massive trade surplus with the rest of the world, to $75.4 billion, around double the number the year before, and up from $58.4 billion in October 2020.

The U.S. isn’t the only country ramping up imports of Chinese goods. Exports to the European Union increased 25.5% to $37.5 billion, shipments to India totaled $7.1 billion, up 20.2% from the same period in 2019, and exports to Latin America totaled $16.2 billion, up 29.3% from November 2019.

China Ramps up Exports to EU, US Hampered by Covid

China maintained its strong 2020 export performance in October, buoyed by a summer of consumer spending in the U.S. and Europe after a locked-down spring. Overall, outbound shipments increased to $237.2 billion, up 11.4% compared to the same month a year before.

After almost a year of robust export growth, it’s becoming clear that the global Covid-19 pandemic is accelerating the trend of China’s emergence as the world’s dominant economy.

China is now the only major industrial nation expected to show economic growth this year. The International Monetary Fund has predicted a gross domestic product expansion of 1.9% in 2020, and 8.2% in 2021. Manufacturing in the country has risen to its highest levels since 2011. China aims to become the world’s biggest economy by 2035.

That economic power is based on exports, especially to the U.S. and Europe. And now China, armed with a head start in beating back the Covid-19 virus, is grabbing market share from companies and countries that have had a more difficult time getting fired up again.

Exports to the European Union increased 9.2% to $33.6 billion, while shipments to the U.S. spiked a whopping 22.2% in October, rising to $43.8 billion and widening its trade surplus, a source of political tension with Washington, to $31.4 billion from $30.8 billion in September.

China’s ongoing export boom is even more extraordinary given the world’s ongoing contraction. The Organization for Economic Co-operation and Development has said that global GDP will shrink 7.6% in 2020 and expand by 2.8% in 2021, with a full recovery coming only in 2022.

What’s remarkable, too, is the wide range of goods China is exporting. In October, China increased its exports of consumer goods, like toys and furniture, medical devices, and high-tech goods.

Exports of garments and clothing accessories increased 6.8% to $13.2 billion. Exports of home appliances increased 39.6% to $6.2 billion. Shipments of plastic products leapt 34.6% to $8 billion. Exports of auto parts increased 18.8% to $5.5 billion.

To be sure, there are signs of saturation in some markets. Exports of mobile phones declined 20.2% to $12.8 billion. Shipments of bags and containers fell 19.9% to $1.8 billion. There is a risk that Western consumers will cut back on spending as they run out of cash and face societal restrictions this winter.

With Covid cases resurging, China will keep shipping containers of masks, intubation machines, and other medical gear needed to fight the pandemic. In October, exports of medical devices increased 31.6% to $1.4 billion.

At it gets wealthier, China is also on its way to becoming the world’s top consumer market. China’s per capita GDP will achieve the status of a “mid-level advanced country”, according to a recent report by the Chinese communist party.

In October it ramped up imports of meat, fruits, and cereals. Its purchases of soybeans increased 44.2% to $3.5 billion. Imports of high-tech products increased 9.7% to $60.5 billion. China’s imports of coal declined 48.5% to $921 million, a stunning decline that reflects its phasing out of the dirty fuel as an energy source. In 2010, China imported $18.2 billion worth of coal. In its place, China is burning more natural gas. Imports of natural gas shrank by dollar value but increased by quantity.

Beijing has promised to keep its promise, made in January as part of the so-called Phase 1 trade deal, to buy an extra $200 billion of U.S. soybeans and other commodities over the next two years.

It may have to make further deals to appease trading partners. With its economy outpacing everybody else’s, China’s trade surplus increased in October to $58.4 billion from $37 billion in September, beating economists’ expectations by around $10 billion.

Poland’s Rise Fueled by Exports

The economic anchor of Eastern Europe is Poland, the most successful of all former Soviet bloc nations. Thanks to its trade prowess, the country is turning into one of the economic pillars of all of Europe.

In the first half of 2020, Poland exported $121.6 billion worth of goods. That’s more than bigger countries like Australia or Brazil—and a dramatic increase from the $77 billion Poland exported during the same period in 2010. Its portfolio of strong export business includes industries as diverse as autos, steel, plastics, pharmaceuticals, furniture, wood, meat, potatoes, and tobacco, according to an analysis by Trade Data Monitor, the world’s premier source of export and import statistics.

The keys to its success have been its large population (38.2 million, more than any Eastern European EU neighbor), low labor costs relative to Western Europe, central location, and proximity to Germany, an industrial titan and the world’s third greatest exporter.

Poland is now Germany’s fifth largest trading partner, behind only China, the U.S., Netherlands, and France. Consider this: Germany now trades more with Poland than with Italy, Russia, or the UK. Germany and Poland’s combined industrial network resembles that of other powerful trade and manufacturing pairs, such as Australia-China, U.S.-Canada, and Japan-Taiwan.

Poland’s dramatic rebuild after struggling with poverty during the 20th century has turned it into one of the most diverse economies in the world, with a long, sophisticated supply chain that means it is better equipped than most of the European Union’s 27 other members to weather the coronavirus crisis. In fact, during the 2008-2009 financial crisis, Poland was the only country to avoid a recession.

Already it’s clear that Poland won’t fare as well this time around, despite registering relatively low numbers of coronavirus cases and deaths. The economy is expected to shrink this year by over 3%, its first contraction in decades.

A rebound will depend on trade. Poland’s top exports in the first half of 2020 included autos and auto parts ($11.1 billion), TV equipment ($2.3 billion) and gas turbines ($1.4 billion). But the country also includes staple manufactured goods such as furniture ($6.3 billion in the first half of 2020), and more basic goods such as plastics ($6.1 billion) and articles of iron and steel ($4.1 billion). It’s also a big agricultural exporter, shipping out meat ($2.7 billion) and tobacco ($2.3 billion).

Poland's Top Exports; Billions USD; Jan-June 2010 & 2020; 84 | Machinery; 85 | Electrical Machinery; 87 | Vehicles; 94 | Furniture; Lighting; 39 | Plastics; 73 | Articles of Iron or Steel; 02 | Meat; Source: Trade Data Monitor LLC; October 23, 2020

The auto sector, in particular, has been a boon. Total auto exports rose to $30.3 billion in 2019 from $20.9 billion in 2010. Fiat, Toyota, Volkswagen and other major firms all produce cars and parts in Poland, often as part of supply chains that include factories in Germany.

That kind of integration was what Poland was hoping for when it joined NATO in 1999, and the European Union in 2004. Massive EU investment in infrastructure set up the road, rail and port routes that enable massive imports and exports of industrial goods, including iron and steel, plastics, and autos and auto parts from Germany. The country’s middle-class population has also boosted consumption of imports, which rose to $265.3 billion in 2019, up from $177.9 billion in 2010.

To be sure, Poland still faces challenges, including political tension, anti-German public sentiment related to memories of World War Two, infrastructure weaknesses, restrictive labor laws and emigration to Western Europe. And there’s the coronavirus. A second Covid-19 wave “will again negatively affect industrial production,” said Monika Kurtek, chief economist at Bank Pocztowy, according to Reuters. But thanks to trade, Poland is expected to recover. In 2021, its economy is expected to expand by 3.5%, according to the World Bank.

Chinese Demand Boosts Covid-19 Recovery

China, the world’s most powerful trading nation, this week reported September exports of $239.8 billion, up 9.9% over a year before. The strong performance suggests that the global economy may be recovering from the devastating impact of the Covid-19 pandemic, which has infected over 38 million and killed over a million people around the world.

Significantly, imports climbed 13.2% to $202.8 billion, suggesting that a global economic recovery from Covid-19 could hinge on China’s 1.4 billion consumers, and Beijing’s vigorous state investment policy, instead of consumers in wealthy Western countries. The U.S. is the world’s richest consumer market, and U.S. imports shrank 5.6% to $203.5 billion in August, the most recent month available, according to Trade Data Monitor, the world’s premier source of trade statistics.

Although China’s better-than-expected trade results suggest that the overall global economy picture is not as bleak as feared, the world’s finances are still troubled, burdened by shaky consumer demand, and ballooning debt. The global economy is getting better, but it’s not yet healed. This week, the International Monetary Fund improved its forecast for 2020 to a 4.4% contraction in global GDP from a 4.9% decrease. In 2021, the coronavirus pandemic will continue, but global GDP growth is expected to bump back up to 5.2%.

Covid-19 is still reshaping economies in profound, structural ways. People spend differently when they spend more time at home and less on the road. Chinese exports of bags and similar items, for example, fell 18.8% to $1.8 billion in September, and those of shoes fell 8.1% to $3.3 billion, while shipments of home electric appliances rose 42.9% to $6.5 billion, TDM data showed. And lower commodity prices are still having a distortionary effect on raw materials. Imports of petroleum, for example, increased 17.6% by volume to 48.5 million tons but declined 15.3% to $15.9 billion.

Traditionally, economists look at China as the world’s factory floor, which is why its stronger export performance in September is encouraging, although its numbers have been inflated by shipments of medical supplies, surgical masks and ingredients for pharmaceuticals. And there are other signs of recovery. Shipping giant Maersk reported strong results this week, based on a rebound of orders for use of its massive container ships, the linchpins of modern trade.

But it’s China’s increasing consumption that is likely to have a more pivotal role in rebooting the global economy. Sales of cars, computers, home appliances and other staples of middle class life are rising in China. Its rising imports are a belated fulfillment of a promise Beijing made to its open markets when it joined the World Trade Organization in 2001.

In September, Beijing boosted purchases of soybeans, copper and grains. Imports of meat increased 40.5% to $2.3 billion, shipments of iron ore into the country increased 22.5% to $12 billion, imports of high tech products increased 19.9% to $70.6 billion.

Spurred by a rising middle class and a state-directed investment policy, Chinese imports are outpacing shipments from Asia to rich Western countries. Chinese exports to the European Union increased 10.9% to $34.6 billion, while imports from EU increased 22% to $25.7 billion. And exports to US increased 20.4% to $44 billion. Imports from US went up 24% to $13.2 billion. That dynamic is spreading to other countries. Exports to Brazil rose 15.7% to $3.4 billion, while imports from Brazil increased 30.2% to $8.6 billion.

With trade protectionism rising in the West, the global economy is slowly splitting into Eastern and Western poles, TDM data showed. China is in the process forming a mini-manufacturing hub with Vietnam. Exports to Vietnam exploded up 38.3% to $10.9 billion in September, while imports from the Asian neighbor increased 19.9% to $8.8 billion.

China Builds Up BRI Supply Chain For Covid-19 Vaccine

As the global pharmaceutical industry ramps up industrial scale Covid-19 vaccine planning and production, new supply chains are taking shape in the U.S., Europe and Asia, according to the latest export and import statistics supplied by Trade Data Monitor.

In Asia, it is China leading the effort, trade numbers show. With vaccine-related pharmaceutical production and trade surging, the Covid-19 pandemic is expected to fuel further growth in the country’s fledging pharmaceutical industry. The country’s total pharma imports increased to $22.8 billion in the first eight months of 2020, up from $4.5 billion over the same period 10 years ago, according to TDM data.

China, as the world’s most populous country and initial epicenter of the coronavirus outbreak, has said it wants to scale up Covid-19 vaccine capacity to 600 million doses by the end of 2020, and, by the close of 2021, a billion doses, according to its National Health Commission. In the U.S. and Europe, pharmaceutical corporations have set lofty targets, too. Pfizer and Moderna, for example, have each said they hope to make at least a billion doses in 2021.

Their work is needed: The world may need over five billion doses in 2021, which is going to require massive-scale production of ingredients and delivery mechanisms. Big Pharma’s wish list includes syringes, vials and synthetic rubbers such as latex, and large-scale doses of chemical components such as yeasts, proteins, and gelatin.

The world’s top health officials want broad production and administration of Covid-19 vaccines. Tedros Ghebreyesus, the director-general of the World Health Organization, has said that “the goal must be to vaccinate some people in all countries, rather than all the people in some countries.”

That means multiple supply chains and poles of production. To be sure, the U.S. and Germany still lead China in the export of most vaccine ingredients, but China is catching up. As Beijing pushes for more vaccine production, Chinese companies have built up a dense matrix of chemical suppliers. As it produces more, it’s increasing exports of ingredients to other Asian countries, establishing a network across the 70-some member countries of its Belt and Road Initiative, which aims to build up and consolidate export markets, and a broad trading network, in Asia.

Chinese exports of yeast proteins and similar ingredients that can be used to make vaccines ballooned over six times, to $1.2 billion during the first eight months of 2020, up from $192.5 million during the same period in 2019. The biggest buyer was Hong Kong, a key trading hub, followed by the U.S., Philippines, Russia and Indonesia. The Philippines and Indonesia are two of the most populous countries in the Belt and Road Initiative region.

In China a state-led effort has overseen the construction of manufacturing facilities for a gamut of Covid-19 vaccine related production. For example, in August, exports of textiles and fabrics including the protective medical masks everybody is wearing increased to $14.7 billion, up 48.5% from August 2019.

Although universities, pharmaceutical firms and private researchers still haven’t completed their work on designing a new vaccine that is proven safe and effective, factories are already producing what they need to make vaccines.

The largest part of a modern vaccine dose is water, and it includes a dozen core components, including yeasts, gelatins, proteins and formaldehyde, many of which are now being made in and exported by China.

Chinese exports of albumin, a protein used in vaccine production, often derived from eggs, exploded to 1200 tons during the first eight months of 2020, up from 29.5 tons over the same time period in 2019.

Trade is increasing in the delivery mechanisms for vaccines too. The total number of syringes exported by China increased 6% to 10 billion, from 9.5 billion. And shipments of the small vials and glass bottles used for vaccines increased 6.6% to $638.3 million.