China's Rising Exports: Putting Trade Surplus and Export Numbers Into Global Perspective
Earlier in the week, Business Week and Bloomberg shared the latest trade forecasts to come out of China, which provided evidence of a continued strong export market for the remainder of 2010, despite rising costs in the region and a US push for an appreciation of the RMB. Accordingly, "China's exports may gain 16.3 percent in the second half from a year earlier," the article suggests, citing sources from within China. This could result in a trade surplus for the second half of the year of $97.8 billion. To put this in perspective, China's trade surplus alone is approaching the size -- and could soon surpass in the coming years if the 2H 2010 growth rate sustains itself -- the entire GDP of Ireland, including government spending (and the surplus will soon be larger than the GDPs of Israel, Hong Kong, Malaysia and Singapore as well).
Overall on the year, China's trade surplus "may be $153.1 billion," according to the sources in the report. What does this translate to in export and import volume change terms? The article suggests that "Exports for the year may rise 24.5 percent and imports may rise 33.6 percent, according to the report." My estimates suggest this would bring China's export volume to nearly $1.5 trillion for the year, based on their roughly $1.2 trillion in exports (2009 numbers, according to the US/China Business Council). In comparison to world GDP numbers, China will export more in 2010 than the individual country GDPs of Russia, India, Australia, Canada, Spain and Mexico!
What's amazing about these numbers and GDP comparisons is that China exports continue to grow despite rising price pressure and lingering quality, traceability and related concerns. Indeed, they're even more remarkable considering that Chinese suppliers and manufacturers will have to start paying more livable wages to employees and that the added costs of building traceability into the supply chain to avoid tainted, recalled or otherwise compromised products -- including melamine, which continues to make its way into the milk supply chain -- could further add to the China price. Perhaps the only thing that will slow China's export growth will be second global economic slowdown, or US policy measures that make China play by the same set of rules the rest of us do.
TweetBacks
1) Economic indicators are up, but we still believe in our double dip recession. We're pretty confident about that, because if we keep repeating it long enough, there will be another recession, even if we have to wait years.
2) China's export market is strong for the remainder of 2010, further undermining our double dip recession claim. It must be because they are competing unfairly or something.
Regarding China, they play by their own rules, period. I'm all for free trade -- believe me, I always have been. But I'm more and more convinced that you can't play fairly in a free market when your counter-party is making you play with your hand behind your back, which China is, from the tax breaks it gives exporters to the fact US companies can't invest directly to the currency to labor rules very different than ours -- and far beyond.
I've been to China numerous times and believe they could be great ally and partner for us in the future if and only if they start to play by the same rules set we do.