1/10 I could say I predicted this – yet another month of surging exports and flat imports – but in fact I never expected quite this much. Exports in June grew 17.9% year on year, far more than forecast, to $331 billion. That's up 7.5% month on month. sc.mp/nmto?utm_sourc…

2/10 Imports were up 1.5% year on year, to $233 billion, or up 1.6% month on month. Once we adjust for rising commodity prices and a weakening RMB, China probably imported less this June than it did in June of last year, even as exports surged.

3/10 This tells us that a smaller and smaller share of China's export revenues are being recycled in the form of imports of goods, and a larger share in the form of export of excess savings, implying that the wage share of export revenues is still declining.

4/10 The result was an astonishing (and record) $98 billion surplus in June. It was $390 billion in the first half of the year, nearly 5% of China's GDP, and 52% more than last year's surplus (which was itself a record). It was more than double the surpluses of 2019 and 2020.

5/10 These are incredible numbers, but they shouldn't surprise. Even though COVID has been much more of a demand-side shock to the Chinese economy than a supply-side shock, Beijing has responded with a series of aggressive supply-side stimulus measures.

6/10 At the same time it has almost completely ignored demand-side stimulus measures. The result is that sustainable domestic demand, based mainly on consumption and business investment, continues to stagnate while production inches forward.

7/10 For years I have pointed out that a rising gap between production and sustainable domestic demand can only be balanced by surging trade surpluses and more non-productive investment in infrastructure and property.

8/10 Needless to say that's exactly what is happening, except, of course, that given the doldrums in which the property sector finds itself, it is mainly infrastructure investment that is carrying the domestic load.

9/10 As evidence of the surge in non-productive investment we should see debt surge relative to GDP, and sure enough, that's what has happened. twitter.com/michaelxpettis…

10/10 Many people think surging trade surpluses are a good thing, but as I explained in January, that is certainly not the case for China. Its surging trade surplus is one of the strongest indicators of the deterioration in the quality of Chinese growth. ft.com/content/a38c83…