Shrinking Chinese imports and slowing export growth dampen the economic outlook

  • The decline in imports reinforces signs of weak domestic demand
  • It highlights weakness in many of China’s trading partner economies
  • The global economy will not be able to rely so much on China as an engine of growth
  • Slower export growth shows that China’s post-COVID recovery will take time

BEIJING (Reuters) – China’s imports contracted sharply in April while exports rose at a slower pace, reinforcing signs of weakening domestic demand despite the lifting of coronavirus restrictions and mounting pressure on an economy already struggling in the face of slowing global growth. .

China’s economy grew faster than expected in the first quarter thanks to strong consumption of services, but factory production slowed and the latest trade figures point to a long way to go to regain pre-pandemic momentum at home.

Customs data on Tuesday showed that incoming shipments to the world’s second-largest economy fell 7.9% year-on-year in April, extending the 1.4% decline in the previous month, while exports grew 8.5%, down from 14.8% in March.

Economists polled by Reuters expected no growth in imports and an increase in exports of 8.0%.

“At the beginning of this year, one might have assumed that imports would easily exceed 2022 levels after reopening, but this has not been the case,” said Xu Tianchen, an economist with the Economist Intelligence Unit.

“While China’s post-Covid recovery has been fast and sharp, it has been largely self-sustaining and not felt by the rest of the world,” he added.

Government officials have repeatedly warned of an “extreme” and “complex” external environment in the wake of mounting recession risks for several of China’s major trading partners.

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The sharp deterioration in trade flows last month will only serve to renew concerns about the state of external demand and risks to the domestic economy, especially given the weak recovery from the previous year when incoming and outgoing shipments were severely disrupted by China’s coronavirus restrictions.

“Given the bleak outlook for external demand, we believe exports will decline further before bottoming out later this year,” Zichun Huang, China economist at Capital Economics, said in a note.

The data seemed to push stocks in Hong Kong and mainland China lower, although global factors also played a role. Hong Kong’s Hang Seng fell 1.11% in the early afternoon, while China’s CSI300 was 0.26% weaker, after rising 0.5% before the lunch break.

Reuters graphics
An aerial view shows containers and cargo ships at the port of Qingdao in Shandong Province, China on May 9, 2022. China Daily via REUTERS/File photo

import pressures

The contraction in imports indicates that the global economy will not be able to rely as much on China’s domestic growth engine, and while the country is re-exporting some of its imports, it is also reinforcing the extent of weakness in some of the economies of its major trading partners. .

The decline of 15.3% in the import of semiconductors indicates the magnitude of the decline in demand in the re-export market for these parts.

Analysts say the sharp tightening of global monetary policy over the past 12-18 months and recent Western banking pressure remain concerns about the prospects for recovery in both China and the world.

Shipments growth to ASEAN — a bloc of Southeast Asian nations — slowed to 4.5% in April from 35.4% last month. The region is China’s largest export partner.

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Other recent data also showed that South Korea’s exports to China, a leading indicator of China’s imports, fell 26.5% in April, continuing to decline for 10 consecutive months.

China’s April coal imports fell from a 15-month high the previous month, to ease as demand in the Asian giant weakened. Imports of copper – a proxy for global growth – and natural gas also declined in the same period.

The latest official manufacturing PMI for April showed a sharp contraction in new export orders, underscoring the challenge facing Chinese policymakers and companies hoping for a strong post-COVID economic recovery.

China’s first-quarter GDP data last month, while providing some comfort, raised doubts about the demand outlook due to a weak property market, slowing prices and soaring bank savings.

The government, which has ramped up a range of policy support measures, is aiming for a modest GDP growth target of around 5% for this year, after badly missing the 2022 target.

“The global economy is deteriorating and China’s manufacturing sector will be weakened,” said Iris Pang, chief China economist at ING.

“It is likely that, in response, the government will step in to support the labor market in the manufacturing sector through fiscal stimulus.”

Reporting by Joe Cash; Editing by Shri Navaratnam

Our standards: Thomson Reuters Trust Principles.

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