China’s worse-than-expected exports deal a fresh blow to the economy Ship’s crew

(Bloomberg) –

China is under pressure on trade as overseas shipments slow and domestic demand remains weak. Deteriorating global growth prospects and geopolitical tensions make a reprieve unlikely anytime soon.

The country’s exports in June fell 12.4% year on year in dollar terms, the Customs Administration said on Thursday. That was the second straight month of declines and the sharpest drop since the pandemic broke out in early 2020. Imports fell 6.8%, according to customs data.

This resulted in a trade surplus of $70.6 billion for the month. Economists had forecast exports would fall 10% while imports contracted 4.1%.

Global demand has been a strong driver of growth in China over the past three years, although this started to slow in late 2022. Exports are now down in four of the six months so far in 2023.

With global growth slowing and many central banks still appear willing to raise interest rates to quell inflation, it looks increasingly unlikely that foreign demand for Chinese goods can help the world’s second-largest economy as its recovery falters device.

“We see little recovery for China’s exports in the second half of the year as the US is likely to enter a mild recession while the eurozone economy is likely to remain weak,” wrote Duncan Wrigley, chief China economist at Pantheon Macroeconomics, in a note after publication data release.

“The risk of an escalating tech trade war with the US cannot be ruled out,” Wrigley said. He pointed out that Beijing’s export restrictions on gallium and germanium used in the semiconductor and electric vehicle industries will come into effect from next month.

Weakness in export demand was widespread. Exports to the US fell nearly 24%, the 11th straight month of declines and the worse result since the dip at the start of the pandemic.

Shipments to ASEAN, South Korea, Japan, Taiwan, Germany, Italy, the UK, the Netherlands and Canada all fell by double digits, and shipments to France also fell.

“External uncertainties are mounting and weak global economic momentum and the prospect of slowing growth are not yet improving,” said Bruce Pang, chief economist and head of Greater China strategy at Jones Lang LaSalle Inc. Play video

“The effects of the release of previous pent-up orders have basically disappeared,” although exports of items like electric cars and batteries continue to improve, he said.

China’s stocks rose on Thursday, while Asian stocks across the board rose. The mainland benchmark CSI 300 index closed 1.4% higher, its biggest rise in a month, while Hong Kong-traded Chinese stocks were up 2.6% as of 3:55 p.m. local time. The offshore yuan was little changed at 7.1658 per dollar.

Unbalanced trade

The import data underscores the weakness of the domestic economy and the impact of the technology war with the US and its allies. Demand in China for electronic parts from Taiwan and South Korea and goods from other countries is still declining. Imports of soybeans, copper ore and concentrated copper, iron ore and natural gas all fell from May.

This has caused the country’s trade to become increasingly unbalanced, with the surplus in the first six months reaching record levels for the period until the late 1990s, according to the data.

“Slacking foreign demand continues to affect China’s trade,” said Lyu Daliang, spokesman for the General Administration of Customs. “The global economic recovery is missing a driver. Global trade and investment are slowing while unilateralism, protectionism and geopolitical risks are increasing.”

The government is keen to increase stimulus to support domestic growth – and developments in global demand later in the year will be a key factor for Beijing in deciding how much aid is needed.

“When you put trade and other data together, we see a realistic chance of a measured stimulus,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. He expects imports to outpace exports in the second half of the year with a modest domestic recovery and commodity prices to be less of a drag.

–With the support of Yujing Liu.

© 2023 Bloomberg LP

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