China’s Exports Extend Declines: Economy In Pressure
China’s economy is facing uncertainty as its exports and imports continue to decrease in the first two months of the year, despite recovering from Covid-related restrictions and outbreaks. Official data released on Tuesday showed that exports declined by 6.8% in January and February, which was an improvement from December’s decrease of 9.9%. It was also better than the anticipated 9% decline predicted by experts.
However, imports saw a higher contraction of 10.2% during the same period, which was higher than the 7.5% drop seen in December and the expected 5.5% decline forecasted by economists. The country’s trade surplus for the first two months of 2023 stood at $117 billion.
According to economists, the decline in imports can be attributed to lower commodity prices and a stronger dollar, rather than a lack of domestic demand. In order to avoid distortions from the Lunar New Year holiday, trade data for the first two months of the year are typically combined. Although China’s trade figures for the first two months of 2023 were mixed, the general trend remains weak, as stated by Zhou Hao, the chief economist for Guotai Junan International Holdings.
When trading resumed on Tuesday afternoon after the release of customs data, Chinese stocks continued to decline, with the benchmark CSI 300 Index falling 1.1% as of 2:13 p.m. local time. Foxconn Industrial Internet Co., a Shanghai-listed arm of iPhone maker Foxconn Technology Group, was the leading decliner.
Consumer spending has rebounded after the government lifted Covid restrictions in December and a post-reopening infection wave eased early this year. Exports were previously a key pillar of China’s economic growth, offsetting a slump in domestic spending due to Covid restrictions that curbed business and consumer confidence. However, the trend has shifted, and the government has announced that the consumer sector will play a more significant role in driving economic growth this year.
The global trade outlook for this year is weak. Commerce Minister Wang Wentao reported last week that many companies are seeing declining orders, with the value of orders shrinking, and long-term contracts becoming shorter.
Data for Tuesday’s exports showed that the largest drags were the equipment used for data processing, along with LCD displays and integrated circuits. However, exports of cars and chassis, as well as refined oil, were strong, increasing by 65.2% and 101.8% in value, respectively.
Customs data showed that China’s purchases of edible oil, coal, and rare earth had the greatest increase in volume among all goods bought in the first two months of the year, while those of semiconductor parts and steel products had the largest declines. Meanwhile, imports of crude oil and natural gas declined by 1.3% and 9.4% respectively, on a year-on-year basis.
While exports to Southeast Asian countries increased in the first two months of the year, trade with the European Union, United States, and Japan fell, according to the customs authority. Mechanical and electrical products accounted for 58% of the value of exports in yuan terms in the period.
According to Bruce Pang, the chief economist for Greater China at Jones Lang Lasalle Inc, China’s exports are anticipated to encounter significant negative pressure this year, mainly because global trade is projected to decrease due to the anticipated deceleration in the growth of major developed economies.
China has set a modest target of about 5% for gross domestic product growth this year, as opposed to last year’s objective, which was missed by a considerable margin. Economists surveyed by Bloomberg predict that growth will increase to 5.3% this year.