China’s exports are falling, and that’s a bad sign for the global economy
China’s exports are falling, and that’s a bad sign for the global economy
China’s economy is showing signs of slowing down: Households aren’t spending as much for many reasons, including a housing bubble, government debt and an aging population.
And more sour news for the country was released on Tuesday: China’s exports fell 14.5% in July, the biggest decline since February 2020.
China’s exports have been falling steadily for the past year. There are underlying reasons for that, according to Mary Lovely, a senior fellow at the Peterson Institute for International Economics.
“At the top of the list, clearly, geopolitical tensions with the U.S. attempts to at least implement a China plus one strategy,” she said.
That China plus one strategy refers to when businesses outside of China add at least one more country to their supply chain. It’s something that’s become more common after pandemic-induced manufacturing and shipping snarls.
But Lovely said that’s not the whole story. Because China is the world’s top exporter, its trade data is a barometer for consumer spending. Categories that are up? Electric vehicles, mostly to countries besides the United States.
Also? “Suitcases, interestingly enough,” Lovely said, “because people are traveling again.”
Suitcases are a product that gets paired with services, like flights and hotels. And services are a big factor behind China’s export slowdown, because that’s what consumers are spending their money on, said David Dollar, a senior fellow at the Brookings Institution.
“People are out traveling, going to dinner, going to movies, going to see ‘Barbie’ and ‘Oppenheimer,’” he said.
Which are not, of course, Chinese exports. Meanwhile, Dollar said that spending hasn’t just shifted — it’s slowed. “That’s particularly true for the European Union, also the United States,” the major buyers of Chinese goods.
China’s not the only country with falling exports, noted Eswar Prasad, a professor of trade policy at Cornell University. It’s happening across Asia, and that gives us a clue as to what’s happening with the health of the global economy.
The verdict, according to Prasad? “It’s mostly gloom and a little bit of doom.”
He said that we’re not nearing a worldwide recession yet, “but certainly it’s very difficult to find signs of strength in the world economy right now.”
Just when the economic news was on a positive track, a piece of data comes in to make things feel murky again.
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