Modest export growth is currently the only positive aspect of China’s struggling economy. While this improvement in overseas sales may provide some relief and align with Beijing’s growth targets, it is not a long-term solution. In fact, it risks diverting attention from the necessary steps that policymakers must take to address China’s economic woes.
On the surface, the export figures appear encouraging. From January to April, China’s overall export volumes increased by 1.5 percent, with a 4.4 percent growth in value terms. However, a closer look reveals less favorable patterns. The entire advance occurred in January, and the value of exports actually fell between February and April, with April’s exports 7 percent below January levels. This casts doubt on the sustainability of the export improvement.
Furthermore, reports from major trading partners raise questions about the durability of this growth. The Census Bureau of the U.S. Department of Commerce states that American imports of Chinese goods in March were 26 percent lower compared to six months ago. Similarly, the European Commission reports that EU imports from China in 2023 were 18 percent lower than in 2022. Japan also saw an 11 percent decrease in imports from China in 2023 compared to the previous year. While data comparisons may not always align perfectly, these reports strongly suggest that China’s export improvement is not as strong or secure as it may seem.
It is important to consider the reasons behind this export improvement and whether it is sustainable. If there has indeed been a surge, it is likely due to a pricing advantage resulting from yuan depreciation and China’s deflationary tendencies. The Wall Street Journal estimates that these trends have reduced the cost of Chinese goods on global markets by approximately 14 percent over the past two years. This price advantage has been likened to “rocket fuel” for Chinese exports.
However, despite this advantage, American, European, and Japanese businesses continue to diversify their sourcing away from China. This raises doubts about the effectiveness of the price advantage in attracting long-term export growth. Additionally, focusing on simpler, price-sensitive products may take China backward to its less-developed past as a cheap source for goods like clothing, shoes, and toys. China’s export gains have already come at the expense of emerging Asian economies. This contradicts China’s goal of moving towards more sophisticated, high-value products and reducing its dependence on exports.
Even if China were to accept this retrograde solution, it is uncertain how long the currency depreciation and deflation can be sustained to maintain export growth. Ultimately, this approach does not align with China’s long-term economic goals or address its significant economic challenges.
In conclusion, while China’s export growth may offer a temporary reprieve, it is not a comprehensive solution to the country’s economic woes. It is crucial for policymakers to focus on the necessary steps to restore prosperity and move towards a more sustainable and diversified economy.
