China’s exports are booming, but profits could be under pressure, recent data from the country showed.
China’s exports rose 8.7% in August from a year ago to nearly $309 billion — a two-year high, official data showed on Tuesday. This beat a 6.5% increase expected by economists polled by Reuters. August marked the start of peak shipping season ahead of Christmas.
Imports, meanwhile, edged up by just 0.5% in August from a year ago — a sign that domestic demand was still weak. Economists had expected a 2% year-on-year rise in imports.
While China’s robust exports have been supporting the country’s flagging economy amid weak demand, data suggest that exporters have been slashing prices to stay competitive — a trend some economists have flagged.
A Bloomberg analysis on Tuesday also showed that the volume of Chinese exports was rising faster than the increase in value in recent months.
Meanwhile, official data released on Monday showed China’s Producer Price Index — which measures the price of goods at the factory gate — falling 1.8% from a year ago.
It was the 23rd straight month the PPI was in the negative zone, sparking concerns about a “deflation spiral” whereby people could delay their purchases on expectations of further price declines, further dragging the economy.
Bank of America wrote in a Monday note that China needs more policy support to restore consumer and industrial demand because its latest inflation data suggested “underlying inflation momentum remains weak and domestic demand has yet to see a meaningful improvement.”
China’s under fire for dumping cheap goods on the global market
The latest data from China showed the country is still struggling to turn its economy around following the pandemic. It’s dealing with numerous challenges including an epic property crisis, a high youth unemployment rate, and geopolitical tensions.
While China’s strong export performance is supporting its economy, it’s not going down well with the West, which has been lining up to criticize China over its barrage of cheap exports flooding the world’s markets. They say China’s dumping and unfair trade practices have hurt their economies.
The US and European Union have already slapped high tariffs on Chinese electric vehicles — a key growth area Beijing is eying in its economic pivot.
Beijing has consistently pushed back on the West’s criticisms. Chinese authorities say the West’s accusations are protectionist and aimed at containing China’s economic growth.
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