China – further export strength
China's exports continue to be strong. The rise in prices of semiconductors is playing a role, but so is the sharp increase in auto volumes, which is now over 1mn vehicles a month. Protectionism in the rest of the world has yet to disrupt these trends, which thus continue to support China's GDP.
China's exports were once again very strong in June. Amazingly, the monthly run-rate in value terms, which was close to USD300bn in October last year, is now closing in on USD400bn.
Some of this reflects semiconductors. China's chip exports rose 120% YoY in June. However, auto export growth continues to be remarkably strong. In June, China exported more than 1mn vehicles for the first time. That's up from 800,000 just at the end of last year (and close to zero in 2020).
This year there has been some growth in imports for the first time since 2020-21. As with exports, semiconductors are playing a big role in this rise, and much of that is because of prices. That has compensated for the sharp fall in crude imports since the Iran War, which didn't reverse in June.
However, even in semiconductors, imports aren't keeping up with exports, and as a result, the large trade surplus isn't narrowing at all. That net exports are still so strong is good news for Q2 GDP data that will be released tomorrow, providing an engine of growth when domestic demand remains so weak.
For the rest of the world, the onslaught of goods from China is obviously more controversial. Concern right now is probably the greatest around auto imports in the EU. But the rise in China's chip exports is worth monitoring. Semiconductors is one of the few remaining categories of manufactured goods in which China does record a trade deficit.
