China’s export machine is running at full steam again

China's export machine is running at full steam again

Graphic: TP

In August 2020, the People’s Republic sold 9.5 percent more abroad than in August 2019

Yesterday, the Beijing Customs Administration announced that China exported nine and a half percent more in August 2020 than in the same month of August 2019. That makes it the strongest growth since March 2019, the third strongest in the history of the People’s Republic – and one that analysts had not expected in such rough order. They were expecting an August increase of 7.1 percent after a July gain of 7.2 percent.

China’s imports, on the other hand, which analysts predicted would increase by 0.1 percent after a 1.4 percent drop in July, fell 2.1 percent in August compared with the same month a year earlier. Imports from Australia fell particularly sharply, by 26.2 percent.

Imports from the USA, on the other hand, increased by 1.8 percent. Nevertheless, between the end of July and the end of August 2020, the surplus that China achieves in trade with the U.S. Grew from $32.46 billion to $34.24 billion. It has not been this high since November 2018.

New market shares

According to Oxford economist Louis Kuijs, the fact that China’s exports are currently growing faster than world trade shows that the country is in the process of conquering new market shares. From competitors in countries that could not handle the Corona crisis so quickly. This concerns, among other things, the export of textiles. However, this increased by 33.4 percent not only because producers from emerging countries dropped out, but also because Sars-CoV-2 protective masks fall into this category.

Another product category that has just contributed to China’s export success is end-user IT equipment. The demand for them increased, among other things, due to the corona-induced transition of workers to a home office, for which many bought more reactive devices than their old ones, in a double sense, after certain waiting periods. Once this need is satisfied, demand could quickly subside and stay down – because only a rather small group of consumers buys a new computer or smartphone more often than every three years.

New American sanctions come into force on 14. September

In addition, there are uncertainties from new American measures against Chinese companies such as Huawei (cf. The "best means", to guarantee the security of 5G). Their prospect of being able to go to school from the age of 14. Being cut off from chips with U.S. Intellectual property rights on September also helped boost exports from the other China in August: Taiwan posted its 8.3 percent month-on-month increase, according to its statistics bureau chief Beatrice Tsai, largely because Huawei and other companies from the People’s Republic filled their warehouses with related products from the island. Such a high increase had never been seen before in the history of the republic. After four months of contraction and 0.4 percent in July, analysts had only expected growth of 1.6 percent.

Because of these American intellectual property rights to chips, Taiwanese imports also increased: they rose for the first time since April – not only by the expected 0.7, but by 8.5 percent.

The Wall Street Journal sees another reason for China’s trade success in the undervaluation of the yuan. The yuan, at 6.83 to the U.S. Dollar, is the strongest it has been in over a year – but according to the newspaper, this only shows how weak the currency is in the U.S., where the government has increased the money supply much more than in China (cf. "Internationalization of the Yuan").

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