China’s exports surge while imports stagnate. Is global retaliation coming?
Record Trade Balance
Bloomberg notes China’s Record Trade Balance.
Key Trade Points
- The surplus was an unprecedented $992 billion in 2024. That was 21% higher than the previous year and was driven by record exports and weak imports.
- Exports rose almost 11% to $336 billion in December, the second-highest month on record and behind only December 2021, when Chinese firms saw a surge of pandemic-led demand. Outbound shipments for the whole of last year were worth $3.6 trillion.
- Imports rose 1% last month and 1.1% for the whole year.
- Despite shipping record amounts of goods, Chinese exporters have been getting less money for their products, with export prices falling for more than a year as deflation inside China worsens and pushes down the cost of goods.
China’s Not “Dumping” Treasuries
Nearly every month someone on X writes how China is dumping US treasuries and how that will punish the dollar.
The irony is that when China sells Treasuries it is specifically to prop up the yuan, not to punish the US.
I have commented on this numerous times. Here’s an article from Bloomberg stating the same thing.
China Boosts Yuan Support With Warning
Bloomberg reports China Boosts Yuan Support With Warning, Capital Control Tweaks
China has ramped up its support for the yuan with tweaks to its capital controls and a vow to crack down on market disruption, after the currency dropped close to a record low against the dollar in offshore trading.
The People’s Bank of China and other regulators pledged to strengthen their management of the foreign-exchange market, deal with any behavior that may disrupt the market and prevent the risk of a large move in the yuan. Beijing will make sure the currency is basically stable at reasonable levels, the central bank said in a statement.
Tight Grip
The escalation of the PBOC’s battle against yuan bears suggests China is not yet ready to let go of its tight grip on the currency, despite pressure from a yawning interest-rate discount to the US, looming tariff threats and a sluggish local economy.
PBOC governor Pan Gongsheng reiterated the goal of keeping the yuan at reasonable equilibrium levels in a speech at the Asian Financial Forum in Hong Kong.
“The yuan is fully capable of maintaining basic stability as fundamentals of an economic recovery in China will not change, while balance of international payments will remain overall balanced,” Pan said.
Basic Stability Nonsense Three Ways
- If the yuan was fully capable of basic stability then China would float the yuan.
- China would not have capital controls if he yuan could stand on its own.
- And China would not have to resort to selling US treasuries to stabilize the yuan.
Countless times every year we hear nonsense about a “nuclear threat” of China dumping treasuries.
And reports of huge drops in China’s treasury holding are also nonsense despite episodes of selling to stabilize the yuan.
China masks its holding of US Treasuries in State Owned Enterprises (SOEs) and other disguised overseas holdings. Official reports of China’s holdings are grossly inaccurate.
Tools to Manage the Yuan
Also consider Here Are the Tools That China Uses to Manage the Yuan
State-owned banks selling the dollar versus the yuan in spot trading is seen by market a type of shadow intervention, which occurs from time to time.
Since 2023, traders also observed large transactions from the lenders in the foreign-exchange swap market, another method which could prop up the yuan. The banks borrowed dollars via swap contracts which can be sold in the spot market to support the yuan.
Driving up the cost of betting against the yuan offshore was favored as a tactic when China wanted to curb declines during years including 2016, 2018, 2023 and possibly early this year. The key is to mop up liquidity so traders have to pay higher interest rates to borrow the yuan. That can be achieved by having agent banks buy the currency or decline to lend their supply to other banks.
Controlling the flow of funds in and out of the country is one of the bluntest instruments. China moved to limit outflows in the wake of the yuan’s devaluation in 2015 — imposing restrictions on everything from overseas takeovers by Chinese companies to consumers buying insurance policies in Hong Kong — and there has been little sign of a let-up. As the US Federal Reserve began to tighten monetary policy in 2022, Chinese state-owned companies were asked to exercise greater caution in new overseas spending and investment plans.
China’s foreign reserves are among the world’s largest at more than $3 trillion. Policy makers sold billions of dollars in the aftermath of the 2015 devaluation to support the yuan. While this can be a useful indicator, it is also influenced by broad gains in the dollar, which can lead to a drop in China’s reported reserves.
These declines aren’t necessarily a result of intervention, but rather because non-dollar assets in China’s stockpile will have depreciated against the dollar.
China Is Destroying Itself
By pursuing exports at all costs, China is destroying itself.
It only makes sense to add capacity only if the debt is productive and can be serviced. That is not the case now.
To the extent that China is subsidizing exports, it is at the expense of Chinese consumers and to the benefit of US consumers.
Very few people understand this.
For discussion, please see Years of Repeat Central Planning Mistakes Have Doomed China’s Economy
What I Said in 2011
All this talk about how undervalued the Yuan is, how China will rule the world, and why the Yuan will be the next global reserve currency is pure silliness.
China’s growth is nothing more than a credit bubble on steroids. Cities are vacant, yet China keeps building, and building and building.
China is in a debt deflation trap of its own making. Other than exports, no country wants to be like China.
For details, click on the above link.
So, What Country Wants to Be Like Germany Now?
Also consider my December 2024 blast at Germany So, What Country Wants to Be Like Germany Now?
The collapse of Germany shocks many. But I have been discussing why this was inevitable for over a decade.
Export mercantilism eventually blows up.
Germany and China are finding that out now. Yet, both want to double down on policies that caused the stress.
For what to do about this, please consider Trump’s New Tariff Advisor and Advice for Advisors
Exports go brr…
For me that chart showing increasing export/import gap plus overall increase in china export.
I would say following forces in play:
– USA/Europe introduced lots of China sanction on tech transfer plus introduced tariffs. That definitely caused increase of patriotism in china so there is less buying of foreign products in China overall lowering import.
– companies in China are blocked form external technology so they are building their own replacement , example is Huawai which developed their own chip last year. this is causing overall drop in import to China, except maybe raw materials
– end product is also cheaper as those replacement in-house parts are often cheaper
– western world has high inflation having again more and more expensive products while china is having very little inflation end result product form China are cheaper and more preferable in 3rd part countries
End result is increased export of product from China (as they become more preferable than more expensive products form other countries)) and less buying by china anything form outside.
This trend will continue also in 2025 unless we see significant strengthening of yuan which would make product fom china more expensive
Something that many people do not realize regarding “Buying Made in America” products.
Of all kinds.
It is very difficult to find many items because they are just not made here in the USA.
Example: I was trying to find a source for American made, high quality, rust-proof, after-market lug nuts for an F150.
Not some exotic rare item. Just some lug nuts for the highest selling pickup in the country.
I didn’t have much luck.
2 hours of searching.
One trip to a parts store.
Still have not found them..
Here is some information about US consumer online purchase.
In 2023, the total value of consumer online purchases in the United States was $1.119 trillion.
In 2023, more than half of foreign online purchases made by US consumers came from China.
I wonder how many of the folks who complain about our trade imbalance with China, buy stuff online and don’t even realize how much of it comes from China? Or don’t care.
Here are some great stats about online shopping for those who are interested.
https://www.yaguara.co/online-shopping-statistics/
Not interested in the least. We can keep buying all the everyday stuff from China we want. That’s not the issue.
America needs to decouple from China when it comes to pharma, REM, electronics, solar panels, batteries, car parts, etc. These and other strategic goods are what will shape our economic future & security.
Again, China is our enemy & must be dealt with accordingly. It won’t be easy, but big, bold steps must be taken over the next 10 years to ensure the necessary change is achieved.
“I wonder how many of the folks who complain about our trade imbalance with China, buy stuff online and don’t even realize how much of it comes from China? Or don’t care.”
I think the average person is reasonably informed about how much stuff we buy from China. However, they might not know how important Canada & Mexico are, which I believe is a much more important question given the current situation.
I seriously doubt Trump is going to do anything meaningful with Canadian tariffs. Whatever he does is likely not to include Canadian oil.
Mexico, however, is a very different animal today. Hell, in 2023, the Mexican government nationalized a Vulcan Materials mine & port that they had been operating for 30 years, and Biden barely blinked an eye. Trump needs to go full court press with Mexico, IMHO.
Mexico quite literally could be argued as a much greater immediate threat than China due to its support of illegals moving through its territories into the USA.
I didn’t think that Trump would put tariffs on Canadian oil, because we rely so much on it. But he seems determined to do so.
I’ll be very surprised if he does so which doesn’t county for anything, of course.
The Trump team is floating an idea to raise tariffs by a couple of percent each month, until all our trading partners come to the table and concede to Trump’s demands, whatever they may be.
This show just keeps getting better. I am watching with great interest.
People should want to see Trump succeed. I wanted Biden to succeed, but I quickly realized he wasn’t running the country. Time will tell what opportunities to throw shade at Trump may arise. For now, he has a lot of cleaning up to do.
I agree. Both of us & tens of millions of Americans / illegals will be watching very closely how it all goes down.
All he really wants is for people to pay attention to him.
Correct! He’s a narcissist, but he’s still the president none the less.
Fortunately, your fake name comes from some alternate universe.
Everything you people stand for comes from an alternative universe.
…but your reign of terror is at an end…
Oh look… peace is breaking out.
Sounds like the Trump team is fearful of these upcoming tariffs.
Trump should only allow an even trade balance monthly. If China exports one million in February then they must also import one million in February.
And how would that work? Trade is not between governments. It is between businesses. Does Trump contact tens of thousands of US firms and tell each one of them how much they are allowed to buy from China every day? That would be an expensive bureaucratic nightmare to track and manage.
Not to mention individual consumers who buy online and often don’t know where their purchase was manufactured. How does Trump prevent millions of US consumers from buying things online from China or anywhere else? Perhaps you want the government to track and control every single aspect of your life?
“Trade is not between governments. It is between businesses.”
The CCP runs the show in China, so your statement is only partly true. You know this very well. China does not let the Yuan fully float against the dollar. China is doing all sorts of things, outside of lower labor costs, that are strategically allowing them to maintain this trade imbalance.
For better or for worse, the old way of dealing with China is done. It’s over. Get used to it. Like Wray said in his outgoing 60 Minutes interview, China is our biggest threat.
I don’t care about China’s government telling it’s people and businesses what to do. I am concerned about the US government telling it’s people and businesses what to do. If I wanted communism, I would move to China.
“I don’t care about China’s government telling it’s people and businesses what to do”
IMO, it’s a critical statement that contradicts your original point, and maybe you should. It’s one of the fundamental reasons they’re able to run a trade surplus with US. Their government is more of their business than ours is. This is a critical distinction.
And we have all sorts of laws & regulations. Telling importers we’re going to collect a tariff on what they import is not communism, PapaD.
Everything that comes from out of the country goes through customs. There should be a program in place to track this for all countries.
They’d need a very large Dept. of Commerce, in order to do that kind of tracking!
Add the costs to the imports.
But . . . but . . . but
Status Quo Good
Tariffs Bad
Not anymore. It’s time for change, and change is coming.
It’s a disturbing mystery that has drawn the attention of investigators from across Memorial Sloan Kettering Cancer Center (MSK).
Why are a growing number of young people under 50 being diagnosed with over a dozen forms of cancer around the world?
https://www.mskcc.org/news/why-is-cancer-rising-among-young-adults
Answer: Covid Vaccines
Apple invested billions of dollars over a decade to develop an electric vehicle (EV), but canceled the project in early 2024. The project, codenamed Titan, was intended to compete with Tesla.
Xiaomi did it and successful.
That’s the difference.
Now put Tarrifs on Chineese made goods.
You get war.
China will have no way out of the deflationary debt trap.
Tarifs on China will not happen as a result.
Outside of automobiles that is
– China’s exports surge while imports stagnate. Is global retaliation coming?
> Probably not, but rather a normal cycle taking place, that happen to off-set each other. Sometimes referred to as “The Balance of Power” and as such, this would be considered “A Shift”
– The surplus was an unprecedented $992 billion in 2024. That was 21% higher than the previous year and was driven by record exports.
> Ah yes, the World “Flush With Cash” over the past 4 Years (Ironically?). Whether it was Printed, Stolen, Borrowed, or Given, there was a Shitload of Cash flying around the World!
– But weak imports.
> Ah yes, not so much for China. With weak Housing, Distrust in Investments, Loss of support by local Government (on deaf ears). Things will “Stay Slow”, as deflation inside China worsens and pushes down the cost of goods.
– Nearly every month someone on X writes how China is dumping US treasuries and how that will punish the dollar.
> I don’t think China can’t afford to dump US Treasuries, at the moment any way.
– China is not yet ready to let go of its tight grip on the currency, despite pressure from a yawning interest-rate discount to the US, looming tariff threats and a sluggish local economy.
> Excellent Point, as Tariffs also seem to be mentioned more, and more, but as a tool and not so much a weapon. Jury still out on any effectiveness it may have or not have…
– By pursuing exports at all costs, China is destroying itself.
> While often times, “It Takes Money, To Make Money” It doesn’t appear that China “Has The Money” so how to make it could become a very serious issue for them…
CHINA IS COLLAPSING.
CHINA IS COLLAPSING.
China Is Collapsing.
china is collapsing.
china is . . . .
hmmm. . . .
Slowly, and then all at once…
China – No Way OutChina is doomed – we are doomed – tick tock
China’s Government Bond Market Sounding Loud Deflationary Alarm. Is the Japanification China Has Warded Off Finally Arriving?
Western economists and financiers have so regularly predicted a crash or zombification outcome to China’s spectacular run of growth that it’s too easy to dismiss stories about deflation risk as yet more Chicken Littledom. But that would be a mistake.
The warning sign this time is coming not from tea-leaf reading prognosticators but the domestic investor dominated, very large and therefore not manipulable Chinese government bond market. Its plunge in yields to deflation-warning levels is a sign of profound concern about growth prospects. And if actual or borderline deflation becomes entrenched, it’s hard to reverse.
https://fasteddynz.substack.com/p/china-no-way-out
I talked to someone who went to China a few years ago on business. The executives did have functional toilets. The employees had a hole in the floor.
Maybe one day China will have a toilet revolution but right now their citizens by and large do not have modern plumbing and can’t afford the majority of goods they make. Almost none of it.
Until that changes China will remain the largest army of slave labor on the planet which is a serious problem. If they ever do decide to revolt the CCP will fold in 24 hrs or less. Xi knows this reality and knows not to rock the boat even a little.
Most Chinese prefer the squat hole in the floor to the Western sit down toilet. Travelling on one of their high speed trains in 2019 I noticed that those sleek modern trains have that squat hole toilet. Glad I went before I caught the train.
China will need even less imports of raw materials like iron ore and metallurgical coal when the reality of pointless construction for a declining population takes hold. No need for more empty apartments and as for that great high speed rail network all the highly used profitable routes were built years ago and the more recent routes are all unprofitable and cover neither their capital costs nor running costs.
Lots of unemployed Chinese workers now. So many uni graduates that many employers won’t even take resumes from graduates with less than masters degrees. What happens when the tens of millions of unemployed youth and the likely 100 million construction workers get screwed over in a collapsing chunk of the economy? Add in the tens of millions households that have invested in property that is now unfinished, tofu dreg substandard or has suffered declining values. Interesting times are upon us.
massive problem https://fasteddynz.substack.com/p/china-120000000-unfinished-homes/
One of the Shark Tank entrepreneurs invented the Squatty Potty. Apparently, sitting on the toilet, feet on the floor, is not the best position.
I think you want a little more evidence than “I talked to a guy who was there a few years ago” before drawing such sweeping conclusions about China.
China has more land area and 5x the population of the USA, so there will be wide, wide variations in what different people will see while visiting.
And as pointed out below, in China’s case the “hole in the floor” is a cultural preference, not evidence of poverty.
This is not to ignore the huge issues China faces, only to explain that “I talked to a guy…” isn’t nearly enough information to pretend to know anything significant about those issues.
If the USA balanced its budget, every export oriented country in the world would tank.
I recently purchased an off road vehicle to be used for a 2 month trip into the Aussie Outback…. Last night I spend AUD750 buying gear on Temu for the vehicle… if I had bought the stuff at a shop in Australia … I would have spent upwards of $2000. Essentially I got wholesale prices.
China is definitely subsidizing vendors on Temu.
How do I know that? I was an investor in a company that made air purifiers in China.. we sold to the China market … but we also exported… the CCP gave us a rebate for every machine we exported… and that was 15 years ago.
WHY MORE INFLATION IS INEVITABLE
In the past, adding debt was found to be effective way of stimulating the world economy because energy supplies supporting the world economy were not seriously constrained. It was possible to add new energy supplies, quite inexpensively. The combination of additional inexpensive energy supplies and additional “demand” (provided by the added debt) allowed the total quantity of goods and services produced to be increased.
Once energy supplies started to become seriously constrained (about 2023), this technique started to work far less well. If energy production is constrained, the likely impact of added debt will be added inflation.
The problem is that if added government debt doesn’t really add inexpensive energy, it will instead create more purchasing power relative to the same number, or a smaller number, of finished goods and services available. I believe that in 2025, we are heading into a situation where ramping up governmental debt will mostly lead to inflation in the cost of finished goods and services.
https://ourfiniteworld.com/2025/01/05/an-energy-and-the-economy-forecast-for-2025/
I agree.
China has been attempting to flood international markets with cheap tat like a drowning man clutching at straws. Countries like Thailand and Indonesia have recently put tariffs up to defend local markets against cheap imports from China, such what you might see on amazon or lazada and the various indonesian platforms like bukalapak and tokopedia.
China has no serious domestic market. Salaries are cratering, and people feel the pressure (I talk to them). Jobs in decline, and housing market dropping prices by half, wiping people out in terms of equity. People ruined by mortgages that have no chance of being paid.
The Yuan is barely hanging on to the CCP’s range, if they floated it, it would probably sink to levels like in the AEC, where the Rupiah when nuts and now you have prices all with many zeros on them, so much so that people don’t bother with the last three zeros. The biggest denomination is worth about $10… incidentally the price that many unemployed women in China are selling themselves for.
China’s implosion is serious for the world, and it’s going to be a huge story when they finally lose the control of it. They seem to be trying to create another pandemic in China to have an excuse to imprison the whole population again. It ain’t pretty there.
Same with EVs… they are definitely subsidizing massively
7 days before the journey to the land of milk and honey guys. I don’t know what to make of Mr. Peactime president saying that hostages in Israel need to be free or “all hell will break loose” means but I can’t wait for all the worlds problems to be solved like magic.
As for China, meh….India is the new China, time to get some economic focus there. I’m already positioned for profit in India.
“There is no limit to the amount of good that you can do so long as you do not care who gets the credit.”
— Ronald Reagan
India will never be the new China… it doesn’t sound like you’ve been to either, or tried to do business in either.
Done business in China for 20+ years… never in India…
India will not replace China
Vietnam is more the threat
India’s average IQ is about 25 points lower than China’s. Sure, the upper castes in India are smarter than average. Those are the ones who come here.
China’s need (arguably) to diversify to a more domestic consumer-driven economy reminds me of the long discussed need of Saudi Arabia to diversify away from oil revenues. It’s hard to nudge things away from such a concentrated stream of bucks. Like the rule of law, or a powerful global currency, such developments, when successful, have been products of long processes (which might remind one of the PRC’s symbolism of a “Long March”). If so, they had better get marching. Likewise many countries tried to be self-sufficient within the global economy, by a wave of the government’s wand and some kind of public-private schemes (as India tried post-WW2). There is also the example of Saudi Arabia’s attempts to go beyond oil, which, to date, seem to be floundering. What scares me about all this, though, is that Trump’s wish to re-shore manufacturing may have this kind of short-termist fantasy quality as well. Maybe the robots can pull this off, but that would be accompanied by a new kind of “giant sucking sound” of diminishing traditional jobs. I.e., a different variant of what has been happening here since the 1980s.
Hah! consumer economy in red China… that’s a laugh… too many old people; too many dirt poor rural people; too many economicallyu disenfranchised urban people…
they are over the demographic hump, and it’s all downhill from here… they grew on the backs of population growth, it will never happen again this century, they are in terminal decline.
And this https://fasteddynz.substack.com/p/china-120000000-unfinished-homes/
The paradoxically unthinkable: a 1990’s Ross Perot government could have stemmed the tide of US corporatism profit over US national interest. The cows have long left the barn. Nevertheless, using the world-held dollar and the nuclear-capable US military to back that dollar … and to ramp up investment in US manufacturing of chips, infrastructure, and industries needed to support military essential production (like the current administration has been doing) is, perhaps, exactly what #47 will do … Maybe a free-spending Trump-Democrat coalition can spend what is necessary to stabilize the US Hegemony and kick the can of that global US Hegemony a bit further down the road.
Or considering politics … Maybe not.
No more shooting up in the bathroom. Trump effect.
Starbucks, $SBUX, is reversing a policy that had allowed open access to its cafes, now requiring all patrons to be customers
You will have to find another place then. I believe Costco is still woke.
I can tell which of my neighbors are libs by their Costco leaf bags.
Look at the flip side of the trade surplus: The Chinese people imported $1 trillion in foreign currency, selling their goods at desperately low prices.
The Chinese economy is struggling with a long-term, Japan-style (or 1929-style) debt-deflationary depression, the consequence of decades of unprofitable, poorly managed hyper-malinvestment.
In that context, it’s not so surprising that the Yuan is losing purchasing power (vs. global commodities) even faster than the dollar, Euro or Yen.
China is an economic gravity well in APAC… following Japan, but dragging everyone else down with them.
Better revise your post in regards to Japan….
Hits the nail on the head.
The big question is when they have to do another one off devaluation like 2015.