[The latest figures show exports to the United States are growing considerably faster than China’s purchases of American goods. That could provoke more ire from President Trump, who had threatened to impose $150 billion in tariffs on Chinese products.]
By Keith Bradsher
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A production line making
carbon fiber in Lianyungang, China. China once focused
on final assembly of
parts imported from elsewhere, but the country has developed
its own supply chains and
reduced what it must bring in from elsewhere.
Credit Agence France-Presse
— Getty Images
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SHANGHAI
— China’s economy grew at a
healthy pace in the first three months of this year, propelled by strong
household spending and heavy government investment in infrastructure.
It was also helped — albeit much more
modestly — by a factor that could exacerbate the country’s tense relations with
Washington: China is selling a lot more to the United States, and its purchases
from America aren’t keeping up.
China’s National Bureau of Statistics
announced in Beijing on Tuesday morning that the economy had expanded 6.8
percent in the first quarter compared with the same quarter last year. That was
well ahead of the pace necessary to hit the government’s target of 6.5 percent
growth for the entire year.
The country’s quarterly growth figure has
become so implausibly smooth and predictable in recent years that economists
generally look for other ways to gauge China’s economic health. One of those is
trade, which at one time was a major driver of Chinese growth, though over the
last decade it has been far eclipsed in importance by Chinese investment and
household spending.
The latest figures show exports to the United
States are growing considerably faster than China’s purchases of American
goods. That could provoke more ire from President Trump, who had threatened to
impose $150 billion in tariffs on Chinese products.
The trade figures present a mixed picture of
how painful those tariffs could be for China. Over all, trade is not as
important to China’s economy as it was a decade ago, suggesting the country
could better weather a trade fight. But the data also suggests China’s exports
to the United States, specifically, have become more valuable to China’s
economy as it increasingly makes most — or even all — of the parts that go
inside what it sells abroad.
Sizing
Up the Surplus
Mr. Trump has focused on China’s trade
surplus with the United States, or the difference between what it sells to
America and what it buys. And in the first three months of the year, the trade
surplus for goods hit a new high of $58 billion, according to Chinese data.
Trade in services, in which the United States is stronger, is tiny compared
with the trade in goods, and offsets only about a tenth of the deficit in
goods.
Depending which country you ask, China’s
surplus on goods with the United States last year totaled $375 billion,
according to Washington, or $276 billion, according to Beijing. The two countries
use different methods to account for Chinese exports that pass through Hong
Kong, a Chinese city that operates under its own laws. But either way, China’s
Mr. Trump wants China’s annual trade surplus
to shrink by $100 billion — a reversal that could lower China’s entire economic
output by nearly a full percentage point if the Chinese factories producing
those goods simply shut down. Chinese experts dismiss the administration’s
target as unacceptable.
Strictly by the numbers, China’s trade
surplus with the United States helps Chinese economic growth figures, though
the reality of the relationship between the countries is more complex. Many
American consumers and companies benefit from Chinese-made goods, and a number
of economists doubt that Mr. Trump’s focus on lowering the trade surplus with a
single country will help the United States.
Home
Grown
On their face, the numbers suggest that
American businesses have become dependent on China. And in fact, China’s trade
surplus with the United States is growing even as its surplus with the rest of
the world has shrunk.
But something else is going on: China is
depending more on itself.
China was once famous for assembling goods
made from parts that had been bought elsewhere. A smartphone that is made in
China, for example, might have a screen from Japan, memory chips from South
Korea and a main processor from the United States. In fact, those parts and
components long accounted for a sizable chunk of what China bought from the
United States.
Today, China can do all that entirely within
its own borders, making everything from advanced electronic components to car
parts and assembling the final product.
“In the last 10 years, you’ve seen China
become considerably more developed and sophisticated in terms of its own supply
chains,” said Gordon Styles, the founder and president of Star Rapid, a company
in Zhongshan, China, that does rapid prototypes and low-volume test
manufacturing runs for everything from auto parts to medical equipment.
“It is now easier than it ever was before to
produce the entire product here,” he said.
Follow
the Chain
Global automakers and other multinational
companies have moved much of their supply chains to China to avoid Chinese
tariffs, tap the country’s vast work force and move closer to a big new market.
Brad Setser, a Council on Foreign Relations
economist, calculated that imports of manufactured goods from the United States
are becoming steadily less important to the Chinese economy. He estimated that
China now produces within its borders up to four-fifths of the value of each
dollar of exports. That share had been around two-thirds in 2011.
Nadim Ahmad, the head of the trade and
competitiveness statistics division at the O.E.C.D., said that China has been
expanding in areas like research, design and development that had previously
been done overseas. “You’re basically creating a lot more in the economy” as
goods are manufactured, he said.
That means China gets more bang from its buck
from its exports to the United States — and suggests American tariffs could be
more painful than trade’s shrinking share of the economy suggests.
Follow Keith Bradsher on Twitter:
@KeithBradsher.
