Could China's exports continue to drive GDP growth? - Charts of the Week

China's latest export and real estate in 11 charts

"Charts of the Week" is Baiguan's series that features key data points to help you quickly grasp the general state of affairs in China in just a few minutes. We handpick the highlights of the data charts from a variety of sources, analyzing and delivering insights trusted by 100+ top institutional and corporate clients worldwide at BigOne Lab. Don't forget to subscribe before you continue reading!

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China's export was the highlight of the first half of 2024—the strong export volume has contributed to overall economic growth amid slow domestic consumption and weak property markets. However, concerns remain about whether China is too reliant on exports, as export prices fall and potential barriers increase due to concerns over overcapacity.

In this week's edition of "Charts of the Week," we've selected 10 essential charts to examine the export outlook, structural changes in China's trade partner relationships, and an update on the domestic property market, a key factor that affects household confidence. Let's dive in!

The upside for export growth is facing pressure

China's trade surplus reached a record high in June, but the trade balance is narrowing. China's export growth in July rose 7% year-on-year, lower than expected, signaling potential concerns about the upside potential for export growth.

Caixin manufacturing PMI, which surveys over 500 manufacturing companies, first dropped to 49.8 in July since December 2023, signaling contraction of factory activites.

Notably, the Caixin Manufacturing PMI had been improving above the 50 index in 2024H1 (a >50 score indicates expansion), while the NBS (National Bureau of Statistics) Manufacturing PMI lagged behind. The key difference between the two metrics is that the official PMI sample is broader and includes state-owned enterprises and large companies, whereas the Caixin PMI focuses more on small and medium-sized coastal enterprises (compared to the NBS sample, a larger proportion are export-oriented). The decline in the Caixin Manufacturing PMI raises concerns about whether the strong export growth in the first half can be sustained.

The upside potential: Chinese enterprises "go global"

China's outbound direct investment has increased, with more enterprises establishing branches and factories directly overseas. (The overseas revenues of these Chinese enterprises are not fully counted in export figures.)

Hiring for overseas positions remained strong, particularly in construction & manufacturing, as Chinese enterprises export their manufacturing and infrastructure construction capabilities. Wholesale and retail hiring picked up in Q2 2024 as China's e-commerce expands overseas, while the information technology sector has cooled down.

According to MSCI's research, as of April 30, 2024, companies in the MSCI China Index derived 15% of their revenues from international sources, with the information technology, energy, industrials, and consumer discretionary sectors having the highest international exposure.

Overseas markets are also becoming the second growth trajectory for many - companies with higher international revenue exposure outperformed the market.

Continue reading for updates on China's industrial profits, trade partner relationships, and the latest developments in China's property market. To get a sense of what is offered, you are welcome to check out this older post in the same series: Charts of the Week. You can also get free access by sharing us.