China’s growth seemingly came to an end, as exports keep falling while the United States thrives.
China’s sluggish trading activity worsened again in August, although not as much as expected by analysts. Exports from the world’s largest manufacturing country declined 8.8% in August. China represents 28.7% of the global manufacturing output, and its exports are vital for most developed economies including the United States.
However, for almost the entirety of 2023, China’s exports significantly dropped. A Reuters poll expected August exports to fall by 9.2% year-on-year. Although better than expected, the actual 8.8% fall continues to worry global economists.
China’s largest trading partner is the Association of South-East Asian Nations (ASEAN), a free market between countries in South-East Asia. China’s exports to ASEAN dropped by 13.3% in August on an annual basis.
The United States is China’s largest trading partner on a single-country basis. Exports to the US fell by 9.5% in August.
Electric vehicles were the only product whose exports remained stable. In 2023 China achieved the top spot as the world’s largest automotive market, and its meteoric innovation in EV technologies worries European and American carmakers.
In any case, Chinese imports also significantly declined in August, continuing a four-month-long trend. Overall imports dropped by 7.3%, though oil purchases increased by 14.7% so far this year. China is the world’s largest oil importer and is brokering an “oil deal” with Saudi Arabia and Russia.
“In general, the figures still suggest the headwinds remain despite some marginal improvement,” said Hao Zhou, chief economist at Guotai Junan International. Hao, however, does not exclude that China’s trade decline has hit the bottom yet.
America First
Falling trading activity is not the only crisis gripping China. Rampant deflation and a dangerous real estate collapse threaten future Chinese economic growth.
On the other side of the Pacific Ocean, the United States continues instead to grow. Despite increasingly high interest rates, which might be raised even more at the next Federal Reserve meeting, the US economy continues to prosper.
The US service Purchasing Manager’s Index (PMI) increased more than expected in August. With a reading of 54.5, it was the highest recorded since February. Any reading above 50 indicated growth in services output. Services make up two-thirds of the American economy.
The Biden administration has not shied away from former president Donal Trump’s trade war. On the contrary, the United States has increased export restrictions to China to an unprecedented level.
In particular, microchip technology is closely guarded by the United States, believing that if China closes the semiconductor gap the US global supremacy might be seriously put into question.
