China’s exports contracted in March after growing in the first two months of the year, underscoring the uneven nature of the country’s recovery from the pandemic
China’s exports fell 7.5% in March, and imports also dropped as demand slows down, according to new figures.
It shows that China’s recovery from the pandemic is inconsistent, as highlighted by the export drop in March following growth in the first two months of the year. Latest customs data reveals that in comparison to a year earlier, exports decreased by 7.5% in March, while imports were down 1.9%. Both figures, sadly, missed their respective estimations.
During January and February, both exports and imports saw a rise, with rates being 7.1% and 3.5% year-on-year respectively. China, the world’s second-largest economy, logged a trade surplus of $58.55billion in March. In the initial two months of this year, the surplus stood at $125billion.
The dip in exports could be partially explained by a higher comparison base stemming from March 2023 when exports shot up by 14.8% due to the economy’s reopening after extremely strict COVID-19 controls. Due to crises in the property industry sparked by borrowing crackdowns, the economy has experienced medium-term slowdowns.
A further weakness in the nation’s exports could potentially be an additional hurdle for growth. “We think export volumes will rise more slowly this year, given that consumer spending in advanced economies is cooling and the tailwind from last years sharp drop in export prices is fading,” comments Zichun Huang, a China economist at Capital Economics.
However, she positively notes that probably, there would be a surge in import volumes, stimulated by increased governmental spending leading to a boost in demand. A recent official survey of factory purchasing managers has revealed a growth in manufacturing activity for the first time in six months, with new export orders also expanding for the first time in almost a year.
China has set its sights on an economic growth target of around 5% this year, a goal that economists believe will necessitate further policy support. Despite concerns that China might boost its exports to achieve its growth target, thereby contributing to overcapacity in many industries, the latest data suggests otherwise.
The surge in shipments of electric vehicles to Europe has sparked fears about Chinese-made EVs potentially overshadowing those produced by local manufacturers. During her recent trip to Beijing, US Treasury Secretary Janet Yellen highlighted the issue of overcapacity as a key discussion point in her meetings with Premier Li Qiang and other top leaders.
Exporters have been reducing prices to boost their overseas sales, but as losses pile up, manufacturers’ ability to cut prices is dwindling, according to Huang. Earlier this week, the government announced that consumer prices only increased by 0.1% in March, while producer prices fell by 2.8%, indicating a weakness in demand compared to supply.
However, Wang Lingjun from the General Administration of Customs said that weak producer prices do not necessarily signify overcapacity. “The decline in prices is often related to various factors such as fluctuations in raw material prices, technological updates and adjustments and efforts of manufacturers to improve their profits,” Wang said.
Consumers worldwide favour Chinese products such as reliable and durable construction machinery and ceramics that are a “business card of Chinese civilization,” Wang said. “Chinese goods are widely welcomed in the global community, relying on innovation and quality,” Wang said.
