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Imbalance of trade
What does the chart show?
The chart shows China’s trade balance (level of exports minus the level of imports) over the past seven years. China is the largest exporter in the world by value and has historically operated at a trade surplus. During the pandemic, an aggressive zero-Covid policy saw the complete lockdown of many of China’s most productive cities, such as Shanghai and Shenzhen. This led to a collapse in export levels and the country fell into a trade deficit. Since then, export levels have recovered strongly, but with the Chinese government still pursuing its zero-Covid policy and with major production hubs moving in and out of lockdowns, the trade balance has fluctuated wildly. However, the most recent data released in July saw the level of exports surprise significantly to the upside, with China’s trade balance rising to an all-time high of $101.3 billion, breaking the record set in June.
Why is this important?
With tensions rising between China and the US in the aftermath of US House Speaker Nancy Pelosi’s visit to Taiwan, China’s position on the global stage has been thrust into the spotlight. Many believe that China is now able to challenge the US both economically and militarily, and the country’s sizeable trade surplus may support this, having a large trade surplus can be an indicator of a thriving economy. Higher levels of exports boosts growth and employment within an economy, both of which are desirable for a country, and China’s surplus far outweighs the US deficit of almost $80 billion.
The lockdown of Chinese factories saw US consumer prices soar earlier this year, as supplies to the US were squeezed. With the US already working to tackle high levels of inflation, China’s domestic policy is having a heightened impact around the world, an indication of China’s greater clout on the global stage. However, while China’s most recent figures may suggest a positive outlook, a deeper dive into the statistics reveals a different story. In the first half of this year China’s economy grew by 2.5% which may seem impressive by global standards but is significantly below the government’s target of 5.5% annually. Of this 2.5%, exports contributed 0.9%.
An over reliance on exports for growth could be problematic for China; with 20% of China’s GDP coming from exports, it is possible that it has a mutually dependent relationship with its foreign customers. 34% of Chinese exports go to the EU and US and with expectations of a recession high in those regions, China can expect to see demand for its exports fall and with it, the high growth rates that it has enjoyed for so long. There are suggestions that China’s exceptional export performance may only have been driven by an easing of strict lockdowns, with factories only now being able to fulfil orders after months of being shut down.
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By Mondial DubaiWhat does the chart show?
The chart shows China’s trade balance (level of exports minus the level of imports) over the past seven years. China is the largest exporter in the world by value and has historically operated at a trade surplus. During the pandemic, an aggressive zero-Covid policy saw the complete lockdown of many of China’s most productive cities, such as Shanghai and Shenzhen. This led to a collapse in export levels and the country fell into a trade deficit. Since then, export levels have recovered strongly, but with the Chinese government still pursuing its zero-Covid policy and with major production hubs moving in and out of lockdowns, the trade balance has fluctuated wildly. However, the most recent data released in July saw the level of exports surprise significantly to the upside, with China’s trade balance rising to an all-time high of $101.3 billion, breaking the record set in June.
Why is this important?
With tensions rising between China and the US in the aftermath of US House Speaker Nancy Pelosi’s visit to Taiwan, China’s position on the global stage has been thrust into the spotlight. Many believe that China is now able to challenge the US both economically and militarily, and the country’s sizeable trade surplus may support this, having a large trade surplus can be an indicator of a thriving economy. Higher levels of exports boosts growth and employment within an economy, both of which are desirable for a country, and China’s surplus far outweighs the US deficit of almost $80 billion.
The lockdown of Chinese factories saw US consumer prices soar earlier this year, as supplies to the US were squeezed. With the US already working to tackle high levels of inflation, China’s domestic policy is having a heightened impact around the world, an indication of China’s greater clout on the global stage. However, while China’s most recent figures may suggest a positive outlook, a deeper dive into the statistics reveals a different story. In the first half of this year China’s economy grew by 2.5% which may seem impressive by global standards but is significantly below the government’s target of 5.5% annually. Of this 2.5%, exports contributed 0.9%.
An over reliance on exports for growth could be problematic for China; with 20% of China’s GDP coming from exports, it is possible that it has a mutually dependent relationship with its foreign customers. 34% of Chinese exports go to the EU and US and with expectations of a recession high in those regions, China can expect to see demand for its exports fall and with it, the high growth rates that it has enjoyed for so long. There are suggestions that China’s exceptional export performance may only have been driven by an easing of strict lockdowns, with factories only now being able to fulfil orders after months of being shut down.