China’s export growth slowed significantly last month, customs authorities said yesterday, as economic uncertainty is exacerbated by strict COVID-19 lockdowns across the nation.
The weakness in trade comes as global demand for Chinese products weakens with energy prices soaring and the US facing the threat of recession.
At the same time the domestic property sector — which accounts for about one-quarter of the world’s second-largest economy — continues to struggle, with firms staggering under vast amounts of debt.
Photo: AFP
Overseas shipments in US dollar terms increased 7.1 percent year-on-year, the slowest pace since April when a lockdown in Shanghai disrupted shipping and far weaker than economists had predicted, China’s General Administration of Customs said, while imports were up only 0.3 percent, leaving a trade surplus of US$79.4 billion last month.
“The global economy is slowing down, particular with the troubles of what’s happening in Europe, so double-digit exports growth in the past is not sustainable,” Pinpoint Asset Management Ltd (保銀私募基金管理) chief economist Zhang Zhiwei (張智威) said.
Going forward, “single-digit export growth is more likely,” he said.
Sporadic COVID-19 lockdowns around China have dampened consumer enthusiasm and business confidence, while searing temperatures across large parts of the country this summer prompted power rationing for factories.
While officials have announced a range of measures aimed at bolstering the economy, commentators said that there would not likely be any concerted recovery until the tough COVID-19 measures are removed for good.
“As rising energy prices and monetary policy tightening hit US and Western European households, demand for Chinese manufacturing exports is cooling,” S&P Global Market Intelligence Asia-Pacific chief economist Rajiv Biswas said.
Biswas said he expected these factors to continue dampening Chinese exports for the rest of the year, while the country faces “continued weak domestic demand due to the ongoing impact of pandemic-related restrictive measures on consumer spending, as well as the residential construction slowdown.”
Chinese exports to the US declined 3.8 percent last month from a year earlier, the first contraction since May 2020.
Exports to the EU held up better, recording 11.1 percent growth, as China is supplying more energy-intensive goods like aluminum, which has become more costly to produce in Europe. Even so, the increase was still less than half the pace recorded the previous month.
Chinese exports to Russia surged 26.5 percent year-on-year, as Chinese brands filled a gap left by departing Western companies.
Exports to Taiwan contracted for the first time since January 2020, as China halted some trade in retaliation to the visit of US House of Representatives Speaker Nancy Pelosi.
The latest figures “merely serve to underscore how weak domestic demand still is, and how far away that end of year GDP target of 5.5 percent is,” CMC Markets chief market analyst Michael Hewson said.
Net exports accounted for about one-fifth of China’s GDP growth last year. Economists are predicting GDP would expand just 3.5 percent this year.
A smaller trade surplus going forward would also weigh on the currency, which has slumped this year and is close to breaching 7 yuan to the US dollar. The People’s Bank of China has taken several steps recently to slow the yuan’s depreciation, and yesterday set its reference rate for the currency at the strongest bias on record.
Additional reporting by Bloomberg
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