China Reaches Record Trade Surplus, Raising Alarm Abroad

Vast fleets of electric cars. Huge numbers of household appliances. And a seemingly endless supply of toys, clothing and other products.

China’s already formidable exports surged in June as imports shrank, with Chinese companies and households becoming more cautious about spending money. The result was a record monthly trade surplus of just over $99 billion, China’s customs administration reported on Friday.

For the Chinese government, the ever-widening trade surplus is good news. Consumers in distant markets are buying many of the goods that Chinese households no longer want. That helps keep factories open in China, and provides the demand for even more factories under construction as part of a national strategy to expand industrial output.

But China’s soaring trade surpluses have prompted alarm in many foreign capitals. Officials around the world worry that exports from China will displace their own industrial output, forcing factories to close and hurting economic growth. Governments in United States, the European Union, Brazil, India, Turkey and elsewhere have been raising tariffs or imposing new tariffs on manufactured goods from China in recent weeks.

China’s trade surplus last month broke a record set in July 2022, when the country’s factories and ports were racing to catch up with global demand after a stringent Covid-19 lockdown in Shanghai had crippled output throughout much of central China.

Millions of people in China are looking for ways to save money in response to a real estate downturn. Apartments and other types of housing represent between 60 and 80 percent of household savings in China, an unusually large proportion by international standards. That’s why a housing crisis that began three years ago, and that has already led to dozens of developers defaulting on debts, has had a particularly pronounced effect on consumption.

The value of imports slid 2.3 percent in June from a year earlier, to about $209 billion, while exports jumped 8.6 percent, to $308 billion, generating the record-breaking surplus.

Factories in China already make almost a third of the world’s manufactured goods. Xi Jinping, the country’s top leader, has set a national goal of fostering “new quality productive forces,” with an emphasis on building even more factories with lots of robots and other automation.

The Chinese Communist Party’s leadership is set to meet on Monday in Beijing for a four-day strategic review of economic policymaking and ideology that typically takes place every five years. China’s latest economic growth statistics are also due on Monday, with economists expecting a slowdown in the second quarter.

The emphasis on industrial expansion to offset China’s housing crisis is evident in official data: Net new bank loans to industrial borrowers reached $614 billion in the 12 months through March. That was six times annual lending to those borrowers before the pandemic, and almost exactly replaced the loans that previously went to the real estate sector.