As the first country to suffer a Covid-19 lockdown China, the world’s top exporter and trading power, has been under scrutiny. Now it offers hope: In June, Chinese monthly imports increased 2.7% year-on-year to $167.2 billion, and exports rose 0.6% to $213.6 billion, according to Trade Data Monitor, the world’s top source of export and import statistics.
With imports rising faster than exports, China’s trade surplus declined to $46.4 billion in June from $62.9 billion in May, another signal that Beijing’s mighty export machine may have to increasingly rely on the country’s own market of 1.4 billion people.
The June rebound flipped a dismal trend: In May, exports had declined 3.3% year-on-year, and imports 16.7%. And China’s buying resurgence was broad-based: It ramped up imports of meat (+74% year-on-year), cereals (+78.5%), iron ore (+17.4%), soybeans (+73.4%), steel products (+34%), and integrated circuits (+18.6%), according to TDM.
These strong import numbers suggest that China’s sprawling manufacturing machine is kicking back into gear after weathering a long season of Covid shutdowns, which led to China’s GDP declining 6.8% in the first quarter, its worst outcome since the 1960s. The buying suggests that Chinese factories will soon have recharged pipelines of goods to sell and that big Chinese industrial and agricultural buyers are now stocking up on essential commodities.
The question is who’s going to buy what the Chinese are making. The canary in the coal mine is the lack of consumer spending, especially in the U.S. and Europe, as economies continue to roil from lockdowns. The International Monetary Fund projects a global GDP contraction of 4.9% in 2020.
In China’s June export results, there are signs of that demand unease. Chinese footwear exports fell 28.4% to $2.9 billion, bags and containers shipments declined 31.1% to $1.7 billion, steel product exports shrank 26.4% to $3.4 billion, and automobile spare parts shipments dropped 26.3% to $3.7 billion, according to TDM.
There are sectors of resiliency, particularly in medical care, and in the technology people need when they’re stuck at home. Shipments of mobile phones rose 29.8% to $9.2 billion, and exports of medical devices increased 100.2% to $2.1 billion.
And China made good on a promise to hike purchases of U.S. soybeans. Shipments from the U.S. increased 10.8% to $10.4 billion, beating a 1.5% rise in exports to the U.S. to $39.8 billion. By comparison, Chinese exports to the European Union increased 10.6%. While Beijing seeks new markets in Europe, the long-term trend with the U.S. still points towards a diminishing of that essential trade relationship: In the first six months of 2020, Chinese exports to the U.S. declined 11.1% to $177.6 billion, while imports fell 4.7% to $56.4 billion.
Above all, China’s June trade numbers reinforce the most important trend in global trade right now: Around the world, economies are being carried by robust increases in the trade of a catalog of specific sectors, such as communications technology, medical supplies, pharmaceuticals, gold, and commodities like soybeans, that are obscuring the depth of economic damage.
Once countries have enough medical supplies, demand for gold ebbs, and countries and companies get the commodity stockpiles they need, Chinese exports are almost certain to shrink again without Western consumers buying shoes, clothes, furniture, and other durables.
While China’s promising June trade numbers signals that the world economy is far from dead, what the data can’t do is tell us what’s coming if consumer demand doesn’t get up off the floor.