Title: China’s Exports Fall for Second Month, Raising Concerns for Slowing Economy
According to a report by BNN Bloomberg, China’s exports have declined for the second consecutive month in a significant blow to the nation’s slowing economy. Data released by the customs administration revealed that exports dropped 12.4% in June compared to the same period last year, while imports also contracted by 6.8%. The trade surplus for the month stood at $70.6 billion. The figures were worse than economists’ expectations, who had predicted a 10% decrease in exports and a 4.1% decrease in imports.
For the past three years, global demand had been a driving force behind the Chinese economy. However, this momentum began to fade in late 2022, and now exports have fallen in four out of the first six months of this year. External uncertainties are rising, and the global economy’s weak momentum and outlook of slowing growth is not improving yet, cautions Bruce Pang, chief economist and head of strategy for Greater China at Jones Lang LaSalle Inc.
The weakening in demand for Chinese exports was broad-based. Notably, exports to the US plummeted nearly 24%, marking the 11th consecutive month of decline and the sharpest drop since the beginning of the COVID-19 pandemic. Shipments to other key trading partners such as Asean, South Korea, Japan, Taiwan, Germany, Italy, the UK, the Netherlands, and Canada also experienced double-digit declines. Even exports to France were down.
On a positive note, the report highlights that certain industries are performing relatively better. Exports of goods such as electric cars and batteries continue to improve, offsetting some of the overall weakness in the export market. However, the impact from earlier pent-up orders has mostly subsided.
The import data also provides insights into the sluggishness of the domestic economy. Demand for electronic parts from Taiwan and South Korea, as well as commodities from other countries, remains subdued. During June, imports of soybean, copper ore and concentrated copper, iron ore, and natural gas all saw decreases compared to May.
This imbalance in China’s trade has caused the nation’s surplus for the first six months of the year to reach a record level, going back to the late 1990s.
The report underscores the urgent need for increased stimulus to support domestic growth. However, as global growth shows signs of slowing down and numerous central banks continue to raise interest rates to combat inflation, it is unlikely that authorities can rely solely on export demand to navigate through the economic downturn.
Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd., warns of further weakness in China’s exports due to the ongoing global economic slowdown. He states that China will have to focus on boosting domestic demand, and the key question in the coming months is whether domestic demand can rebound without significant government stimulus.
It remains crucial for Beijing to monitor the trajectory of global demand throughout the rest of the year to determine the extent of assistance required to bolster the economy.
In summary, China’s consecutive decline in exports adds to concerns about the nation’s slowing economy. While certain sectors, such as electric cars and batteries, continue to show improvement, a weak global economy and diminishing external demand pose significant challenges for China’s recovery. With an increasing need for domestic demand to drive growth, authorities face the task of stimulating the economy amidst a backdrop of slowing global growth and rising geopolitical risks.
