China’s Export Sector Revives in Wake of Economic Recovery

China’s economy has defied expectations as its export engine has surged back to life, bolstering hopes that Beijing will meet its growth target for the year. Despite weak global growth, exports from the world’s second-largest economy increased by almost 15% in March, driven by sales of electric vehicles and components, as well as an increase in trade with Russia.

The expansion, which came as Beijing aims to achieve a 5% gross domestic product growth target this year, surprised economists, as the target is the lowest in more than three decades. The data suggests an “upside risk” to China’s first-quarter GDP figures, according to Hao Zhou, an analyst with Guotai Junan International.

In terms of trade growth, there was an unexpected surge of nearly 15% in exports from China in March, despite weak global growth. This growth was fueled by sales of electric vehicles and their components, as well as a swell in trade with Russia.

The unexpected increase in exports is said to suggest an “upside risk” to China’s first-quarter GDP figures. New exports including electric vehicles, lithium, and solar batteries were the most important gains, while trade growth in steel and clothing was also strong.

However, exports of personal computers, mobile phones, and integrated circuits declined. Shipments to south-east Asia were resilient, and those to the US and Europe, hit by trade tensions, narrowed their decline. The article warns that geopolitical risks, protectionism, and inflation remain a concern despite the positive trade data.

Additionally, imports beat forecasts, declining just 1.4% year on year last month, compared with expectations of a 5% contraction.

In the past, exports had helped China’s economy during the pandemic when there were liquidity problems in the real estate sector and weak domestic consumption.

However, exports weakened last year due to global inflation and virus outbreaks. Last week, Premier Li Qiang chaired a meeting of the state council and called on officials to stabilize exports to developed countries.

Since taking office as China’s number-two figure, Li has tried to project a more conciliatory tone to international business. Economist Iris Pang from ING predicted that Beijing would also introduce new measures to stimulate consumer demand and support job growth.

Capital Economics analysts have stated that due to a subdued foreign demand outlook, banking sector turmoil, and the delayed impact of interest rate hikes, any export recovery is likely to be short-lived. They predicted that most developed economies would slip into recession this year and believed that the downturn in Chinese exports still had some way to go before hitting bottom later this year.

CICC analysts, a state-run investment bank, also warned that despite rapid growth in shipments of electric vehicles and their components, China could still face a 3% YoY decline in exports, given the continued downward trend in overseas demand and uncertainties stemming from financial risks.