With China’s domestic economy stumbling badly this spring as construction and retail sales slow, the country is unleashing a fresh surge of exports that is preserving millions of jobs in Chinese factories, but could fan trade tensions with the West.
China’s General Administration of Customs announced on Sunday that exports last month surged 15.3 percent from a year earlier, twice as fast as economists had expected and vaulting past last December as the biggest month ever for Chinese exports. China’s trade surplus has expanded in each of the past three months.
As indebted European economies slip into recession and unemployment inches back up in the US, Chinese factories are outcompeting rivals in developing countries and the West to claim larger market shares even as global demand is barely rising.
“Our sales have picked up significantly and we’re now overbooked,” said Roger Lee, chief executive of the Hong Kong-based TAL Group, one of the biggest suppliers of high-end dress shirts to department stores and luxury brands in the US.
China’s renewed success relies heavily on the US market, with Chinese exports to the US soaring 23 percent last month from a year earlier, data showed. Chinese exports to the EU rose only 3.2 percent.
However, resurgent Chinese exports also have the potential to become a political issue in the US elections in November. Mitt Romney, who has clinched the Republican nomination for president, has already promised in campaign ads to stand up to China more vigorously on currency issues. US President Barack Obama has set up an interagency group to investigate trade law violations, particularly by China.
Underpinning China’s export success is a combination of long-term investments in automation and short-term depreciation of the currency.
Manufacturers across China are investing in labor-saving equipment, reorganizing shop floor management and taking other measures to control labor costs, which have been rising steeply as the country grows in prosperity.
For example, in southern China, a manufacturer of home saunas has installed a US$25,000 computer-controlled drill that does the work of up to eight people. A garment company in Wenxi, in eastern China, is purchasing machinery to manufacture buttons more cheaply. And a printer in Wuhan, in central China, is fully automating paper cutting and plans further investments in printing and binding, so that workers will only be required to package the finished product.
“We are investing in additional machinery so as to improve productivity,” said Jessica Meng, the sales director at the printer, Maxleaf Stationery. “Labor costs are too high these days.”
The move to automation, consistent across many industries, is a central reason that Chinese imports in the US are becoming cheaper. Data from the US Bureau of Labor Statistics show that average prices for goods imported from China edged down in April for the first time in almost two years, despite double-digit increases in labor costs.
Rising Chinese labor costs have not yet meant relief for China’s rivals in other developing countries, Japan and the West, partly because automation is offsetting an erosion in Chinese competitiveness.
Beijing officials have strongly endorsed stepped-up equipment investments by exporters. Labor shortages in export zones have meant that workers have not tended to protest the introduction of more machinery.