China’s export growth slowed more than expected in August and imports stagnated, a sign of a darkening global economic picture and weak domestic growth hit by Covid lockdowns and a property slump.
Exports in US dollar terms expanded 7.1% last month from a year earlier, the slowest pace since April when a lockdown in Shanghai disrupted shipping, and far weaker than economists had predicted. Imports grew just 0.3%, leaving a trade surplus of $79.4 billion last month.
China’s slowdown is rippling across the world, with the weak import figures spelling bad news for major commodity producers such as Australia and Brazil. Top manufactured goods makers, like Germany and South Korea, are also seeing weaker demand from China.
At the same time, global demand for Chinese goods is waning as consumers cut back spending because of soaring inflation and shift away from pandemic-related goods toward services. Factories in Europe and the rest of Asia are also scaling back production.
“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,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd. Going forward, “single-digit export growth is more likely,” he said.
Zhang said to achieve faster economic growth in the next 12 months, China’s domestic demand will need to play a bigger role. That would depend largely on whether the government relaxes its Covid Zero policy, he said.
What Bloomberg’s Economists Say ...
“August’s sharper-than-expected slowdown in China’s export growth is another sign that the recovery is losing steam -- and needs more policy support. We expect trade to remain under pressure for the rest of the year, due to base effects and a weakening global outlook.”
-- David Qu, economist
A silver lining for many countries is that a double-digit decline in China’s imports of energy products like natural gas, coal and oil products so far this year is helping to keep global energy prices in check, reducing inflationary pressure.
China’s exports to the US fell 3.8% in August from a year earlier, the first contraction since May 2020. Exports to the European Union held up better, recording 11.1% 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.
Exports were also impacted by China’s extreme weather and Covid outbreaks last month. Some factories in Sichuan province were forced to shut because of power outages, while virus outbreaks prompted lockdowns in places like Yiwu in the eastern province of Zhejiang, a major manufacturing and exporting hub.
“China’s export growth is retreating to its more normal levels after two years of exceptional growth,” said Lu Ting, chief China economist at Nomura Holdings Inc.
A smaller trade surplus going forward will weigh on the currency, which has slumped this year and is close to breaching 7 to the dollar. The People’s Bank of China has taken several steps recently to slow the yuan’s depreciation, and set its reference rate for the currency at the strongest bias on record on Wednesday.
China’s exports to Russia surged 26.5% on-year in August, 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 early August in retaliation to the visit of US House Speaker Nancy Pelosi to the island.
The export volume of smartphones, home appliances and semiconductors all contracted by around 10% in the first eight months of this year, falling from a high base as sales of those products were previously fueled by pandemic purchases. Car exports remained resilient, surging by 56% in value so far this year, making it one of the fastest growing export products along with rare earth and aluminum, according to customs data.
Higher prices for exports, rather than a boost in volumes, may be playing a bigger role in driving up the figures. About half of the headline export growth in July was due to price effects, according to an estimate by Macquarie Group Ltd.
A slowdown in exports adds further strain on the economy already suffering from a stop-start Covid reopening and a yearlong property market slump. Net exports accounted for about a fifth of China’s gross domestic product growth last year. Economists are predicting GDP will expand just 3.5% this year.
“We maintain our cautious view on China’s export outlook due to the softening semiconductor sector and potential weakness in external markets,” said Betty Wang, senior China economist at Australia & New Zealand Banking Group Ltd. “China’s economy is getting weaker as it loses another pillar of support.”
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
Read more articles by Bloomberg News
