China’s Stunning 2024 Export Growth

China’s weak domestic economy and ever expanding production capacity, juiced with an explicit policy of directing state bank credit toward manufacturing, has led to a surge in Chinese exports.  Because Chinese export prices are falling (think of the price of a solar panel), export volumes have been growing much faster than the dollar value of Chinese exports. The phenomenon is clear in their export volume data released by the General Administration of Customs of the People’s Republic of China (GACC) as well the global data compiled by Dutch CPB.

The Dutch global data shows that Chinese exports are outpacing global trade—with Chinese exports up 12 percent or more in volume terms while global trade is growing at more like 3 percent.

What’s more, the Dutch data shows that Chinese import volume growth has collapsed, and Chinese imports in volume terms are now shrinking (looking at the y/y change in the 3-month moving average).

On a year-over-year basis, Chinese export volumes are up 13 percent (data through November, so it will be close to the 2024 annual number) while import volumes are only up 2 percent. With exports around 20 percent of GDP, the 10 percentage point gap implies a net exports contribution to Chinese growth of close to 2 percent of GDP.

China’s GDP data is a bit squirrely (China still doesn’t produce data on real output in level terms, a rather stunning data gap that the IMF should not tolerate). The actual reported contribution may be more modest—but the basic idea is clear: export volumes are way up, and import volumes are contracting.

China’s exports can be compared to those of the U.S. and the EU. U.S. export volumes grew more or less in line with global trade, but Europe’s exports have lagged overall trade growth.

China’s export growth thus appears to be at the expense of the EU in particular. 

Germany really needs to wake up here. The German economy won’t thrive if VW concludes that the only way it can compete globally with the Chinese EV producers is by becoming, in effect, a Chinese car company itself—with design, engineering, software, batteries and production all in China. The new Chancellor really needs to think hard about German economic interests.

China, sadly, doesn’t seem ready to really wean itself off export-led growth. For all the talk of stimulus after China’s September policy pivot, the proposed measures still underwhelm. They have included support for asset markets, notably by encouraging banks to lend to support the equity markets, some help for heavily indebted local governments who need to refinance maturing on and off balance sheet debts. The PBOC is continuing to loosen monetary policy. But the central government remains reluctant to provide real fiscal support for household demand: the rumored increase in the central government’s deficit from 3 percent of GDP to 4 percent of GDP is too modest to really change China’s trajectory.

What’s all the more striking is that China is not providing two way support for global trade. China is exporting, but not importing.

In the past, strong export growth would have implied higher imports of parts, but China increasingly controls the entire supply chain of key sectors—EVs, EV batteries, and EV battery chemicals being prime examples.

In fact, over the last three months of data, Chinese import volumes have shrank year-over-year.

So, who is driving global trade by demanding more output from the rest of the world? The U.S. of course. The decoupling that is visible in the bilateral data disappears when analysts step back and think about the broad patterns of global trade, and the reality that China’s massive goods surplus is now offset by the goods deficits of the U.S. and the UK.

There is another important point. John Authers of Bloomberg has challenged—in the context of speculation that Trump and Xi might be able to strike a broad agreement that included a Chinese commitment to let the yuan appreciate—the notion that China’s currency is currently undervalued.

The nominal CFETS index is back at its 2014/2015 levels, as the yuan’s depreciation against the dollar has been offset by the dollar’s broad strength.

But that is the wrong way to think about China’s currency.

China is steadily gaining competitiveness, thanks to capital deepening (it uses a ton of industrial robots now) and expanding into new sectors (EVs weren’t relevant to China’s economy back in 2014). Basically, a China that doesn’t have an appreciating currency tends to gain global manufacturing market share.

Moreover, China’s currency has clearly depreciated significantly in real terms in the last three years (inflation differentials matter here). According to the BIS, the yuan has depreciated by about 15 percent relative to its late 2021 highs.

That depreciation sure seems to be one big reason why Chinese exports have outperformed global exports recently.

It was obviously somewhat upsetting when the IMF’s flagship External Sector Report for 2024 reported that global imbalances had durably receded. That was in part because it seemed that the IMF was relying too heavily on flawed Chinese data, as the reduction in China’s reported current account surplus was at odds with the better measured customs data (the fall also followed a dramatic methodology change at SAFE that was largely hidden from the world prior to the 2024 IMF staff report).

But this concern was also in part a function of the IMF making a forecasts that were at odds with currency movements. The yuan’s 2022/23 real depreciation would normally be expected to raise China’s surplus—and the dollar’s appreciation after 2021 would normally be expected to raise the United States deficit.

That sure seems to be what is happening now.