A $60 Billion U.S. Stimulus Windfall Is Heading China’s Way

David Ni at the Jiangsu Siborui Import and Export warehouse in Anaheim, in 2020.

Photographer: Kyle Grillot/Bloomberg

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David Ni is expecting a great year for his Chinese car-wheels business, thanks to the $1.9 trillion boost President Joe Biden just gave to the U.S. economy.

Americans flush with $1,400 stimulus checks mean “demand in the U.S. is rampant,” said Ni, whose Jiangsu Siborui Import and Export Co., headquartered in Nanjing, buys high-end aluminum alloy car wheels from Chinese producers and sells them to retailers in the U.S.

“Citizens get cash and they jump into shopping,” he said, predicting his sales will surge by more than 30% this year.

The U.S. fiscal boost will bring huge spillovers for the global economy, especially China, the world’s biggest exporter. About $360 billion of the stimulus package will be spent on imports, according to Allianz SE, with Chinese exports likely to increase by $60 billion over 2021-2022 as Americans snap up computers, household equipment and clothing.

But it also means rising prices for Chinese-made goods that have already started to tick up and a possible worsening in tensions with the U.S. over trade imbalances.

Export Boom Continues

Chinese shipments set to rise again this year

Source: China’s General Administration of Customs, Bloomberg surveys

While U.S. neighbors Canada and Mexico will see the biggest impact relative to the size of their economies, the stimulus package could increase China’s gross domestic product by 0.5% over the next year, according to the Organisation for Economic Co-operation and Development. Bloomberg Economics estimates that a 1% boost to U.S. demand adds about 0.08% to China’s GDP.

That means the economy could expand 9% this year, according to UBS AG, which upgraded its forecast for China’s export growth in 2021 to 16%, compared with 3.6% last year. The export boost would give businesses room to spend on expanding capacity, allowing China to maintain its high levels of investment even as state spending on infrastructure slows, according to chief China economist Wang Tao.

Bloomberg Economics’ Chang Shu also upgraded her growth forecast for this year, projecting a 9.3% expansion from 8.2% previously. The low base in 2020, momentum from the recovery, a milder-than-expected fiscal pullback and firmer global demand “point to a strong pickup,” she said in a report. The government’s official GDP growth target for this year is “above 6%.”

Along with the growth boost is the threat of inflation. There’s already concerns in the U.S. that the stimulus and expected economic rebound this year could lead to faster inflation there, with Treasury yields surging in recent weeks. An increase in imports from China combined with the recent rebound in Chinese factory prices mean American consumers could soon be paying more for their goods too.

Read More: China Producer Prices Jump, Adding to Global Inflation Risks