Reports this week indicate that the struggling Chinese economy had its first increase in exports in six months in November. The surprising development could signal a turn away from lagging production and demand for its products. However, last month’s gains for the world’s second-largest economy were moderate, and experts are skeptical about whether the communist country has turned the corner.
According to customs data, the rise in exports was a modest 0.5% for the month. The positive turn defied global forecasts of a continuing downturn. The slight increase came as the Chinese central planners commanded aggressive price reductions from Chinese manufacturing exporters.
— Reuters World (@ReutersWorld) December 7, 2023
The global import-export trade market remains complex and difficult to predict following the COVID-19 pandemic. The Baltic Dry Index, one key indicator of the strength of global production, reached a three-year high in November. Alongside China, other Asian nations saw increased manufacturing export numbers in November, suggesting China’s positive move is part of a larger regional trend.
Meanwhile, China’s domestic economic situation remains challenging. Internal manufacturing has struggled throughout the year, as local product prices have contracted and input and labor costs have steadily risen as part of global inflation.
China specialist Zichun Huang with Capital Economics expressed skepticism about the longevity of China’s export growth this week. He especially cautioned that the central government’s current price reduction strategy is not likely sustainable.
Dan Wang, Chief Economist at Hang Seng Bank China, says the November increase in China’s exports could have significant implications for the nation’s international trade relationships, especially with the U.S. He points out the disparity between growing demand for consumer goods internationally and slumping demand inside of China.
In 2023, the import-export trade balance between the U.S. and China has continued to show a substantial deficit for the U.S., albeit with some fluctuations. According to data from the U.S. Bureau of Economic Analysis, as of August 2023, the trade deficit with China decreased to $22.7 billion. This decrease was attributed to a slight reduction in U.S. exports to China, which fell by $0.2 billion to $10.9 billion, and a more significant reduction in imports from China, which dropped by $1.4 billion to $33.7 billion.
This trend indicates a continued reliance of the U.S. on Chinese goods. However, the gap between imports and exports has seen a slight narrowing. The trade dynamics between these two major economies are complex and influenced by economic policies, global market trends and geopolitical developments.
Overall, the global production landscape is still cooling. Domestic Chinese challenges, including falling real estate prices and lower consumer and business confidence, threaten China’s hope for a “soft landing” that the U.S. remains hopeful of achieving. Experts point to the glaring need Chinese manufacturers face for domestic demand to rebound to feel more secure about the near future.
The numbers for China from November offer some hopeful signs. However, the overall picture remains murky, and the economic giant faces sluggish domestic demand for the cheap goods it churns out in astonishing numbers.