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.