China export boom to Global South continues

China reported higher-than-expected export growth in May of 11.2% in RMB terms and 7.6% in terms of US dollars year-on-year, indicating that the country is like to meet the government’s 5% growth target for 2024.

All the export growth came from the Global South, while exports to developed markets remained sluggish at levels well below earlier peaks.

Complete data by country isn’t available yet, but several ASEAN countries as well as Brazil showed strong growth.

The Western meme about Chinese “overcapacity” doesn’t play well in the Global South, where demand for Chinese telecom infrastructure, low-cost EVs, solar panels and steel is growing. Despite some minor frictions with developing-market customers, for example, Brazil’s steel industry, China has found an expanding market in the Global South.

China’s exports to developed markets peaked during the Covid boom due to a surge in demand for household electronics, but have settled back to the level of 2018-2019.

China’s direct exports to the United States, though, tell only part of the story. After the Trump Administration imposed a special 25% tariff on about US$200 billion of Chinese imports, Chinese manufacturers re-routed supply chains through third countries in the Global South, for example, Vietnam.

A modest recovery in home sales and higher spending on household appliances and cars, meanwhile, point to a limited improvement in consumer demand. China continues to face economic headwinds due to the property market slump, but a moderate growth rate in the range of the government’s 5% target for this year seems achievable.

Last week, the International Monetary Fund upgraded its 2024 growth forecast for China to 5% from 4.6%.

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