China’s exports surge in Jan-Feb despite waning trade with the US

China’s exports surged nearly 22% in the first two months of 2024 compared to the same period last year, significantly exceeding economists’ forecasts and outpacing December’s 6.6% growth rate. The robust performance was driven by substantial increases in computer chip, automotive, and electronics shipments, according to data released Tuesday by China’s customs agency.

While exports to the United States declined by 11% in January and February, this marked an improvement from the 30% drop recorded in December. Chinese exporters found strength in other markets, with shipments to the European Union jumping almost 28% and exports to Latin America rising 16%. Significant gains were also reported in shipments to other Asian countries, including Japan and India.

The semiconductor sector led the export boom, with shipments soaring nearly 73% by value in the first two months of the year. This remarkable growth reflects the surging global demand for computer chips fueled by artificial intelligence applications, as well as price increases amid a worldwide memory chip shortage. Automotive exports also performed exceptionally well, climbing 67%, while mechanical and electrical products rose 27%.

“While the recent pace of gains is unlikely to be sustained, exports are likely to remain robust given the recent decline in U.S. tariffs and strong demand for semiconductors,” noted Zichun Huang, a China economist at Capital Economics.

China’s import figures also showed significant improvement, rising nearly 20% in the January-February period compared to December’s 5.7% year-on-year increase. However, imports from the United States specifically dropped by nearly 27% from the previous year. The combined data resulted in a global trade surplus of $213.6 billion for China during this period.

Economic analysts typically combine January and February trade data to minimize statistical distortions caused by the shifting dates of the Lunar New Year holiday, China’s most important annual celebration.

The export sector has been a consistent bright spot in China’s economic landscape, even as the country grapples with internal challenges. In 2023, exports grew by 5.5%, helping push the trade surplus to a record of nearly $1.2 trillion. This resilience comes despite ongoing trade tensions with the United States, as Chinese manufacturers have successfully redirected shipments to alternative markets.

Market observers are closely watching former U.S. President Donald Trump’s planned visit to Beijing in late March, which could potentially extend the trade truce reached in October 2023. Such a development would provide a boost to Chinese exports to the American market. Adding to this positive outlook, a recent U.S. Supreme Court ruling against Trump’s sweeping tariffs has already resulted in lower duties for Chinese goods entering the United States.

Despite these encouraging export figures, China’s domestic economy continues to face headwinds, primarily from a prolonged property sector downturn. Last week, Chinese leadership announced an economic growth target of 4.5% to 5% for 2024, the lowest since 1991, reflecting these persistent challenges.

The ongoing conflict in the Middle East introduces additional uncertainty into the trade outlook. Any disruption to shipping through the Strait of Hormuz could restrict China’s access to Iranian oil and hamper broader commerce with the region.

“Energy inflation is the last thing Beijing policymakers need,” warned Han Lin, China Country Director at consultancy The Asia Group.

Daniel Russel, a distinguished fellow at the Asia Society Policy Institute, cautioned that a prolonged Middle East conflict could drive up oil prices, potentially fueling global inflation and weakening consumption in overseas markets—ultimately dampening demand for Chinese exports.