Daily Management Review

China’s Economic Prospects Clouded By Its Slowing Export Growth And Declining Imports


China’s Economic Prospects Clouded By Its Slowing Export Growth And Declining Imports
China's imports fell dramatically in April, while exports climbed at a slower pace, confirming signs of weak domestic demand despite the removal of COVID restrictions and adding pressure to an economy already struggling in the face of slowing global growth.
The Chinese economy grew faster than predicted in the first quarter, mainly to robust services demand, but factory output has lagged, and the latest trade figures indicate a long road ahead to resuming pre-pandemic momentum at home.
Inbound shipments to the world's second-largest economy dipped 7.9% year on year in April, following a 1.4% drop the previous month, while exports increased 8.5%, slowing from a 14.8% increase in March, according to customs statistics released on Tuesday.
A Reuters survey of economists anticipated no growth in imports and an 8.0% gain in exports.
"At the beginning of this year, one would assume that imports will easily surpass 2022 levels following the reopening, but that hasn't been the case," said Xu Tianchen, an economist at the Economist Intelligence Unit.
"While China's post-COVID rebound has been swift and sharp, it has been largely self-contained and not felt by the rest of the world," he added.
A "severe" and "complicated" external environment is in place as a result of growing recession risks for several of China's major trading partners, according to government officials who have issued repeated warnings.
Given the shaky recovery from a year ago, when inbound and outbound shipments were severely disrupted by China's COVID-19 restrictions, the sharp deterioration in last month's trade flows will only renew concerns about the state of external demand and risks posed to the domestic economy.
"Given the gloomy outlook for external demand, we think exports will decline further before bottoming out later this year," said Zichun Huang, China economist at Capital Economics in a note.
Hong Kong and mainland Chinese stocks appeared to decline as a result of the report, however there were other variables at play as well. Early in the afternoon, the Hang Seng Index in Hong Kong fell 1.11%, and the CSI300 Index in China declined 0.26% after rising 0.5% before lunch.
The decline in imports indicates that China's domestic development engine won't be able to provide much support for the global economy, and when China re-exports some of its imports, it highlights the degree of weakness in some of its main trading partners' economies.
The magnitude of the demand-pullback in the re-export market for such components is shown by a 15.3% decline in semiconductor imports.
According to analysts, recent Western banking stress and the abrupt global tightening of monetary policy over the past 12 to 18 months continue to be worries for China's and the world's prospects for revival.
Shipments growth to ASEAN, a group of Southeast Asian nations, decreased from 35.4% in March to 4.5% in April. China's top export partner is the area.
Other recent data also revealed that South Korean exports to China, which serve as a leading indicator of China's imports, fell 26.5% in April, continuing a slide that has lasted 10 months.
China's imports of coal decreased in April after reaching a 15-month high the previous month as the Asian giant's demand for the fuel decreased. Copper imports, a measure of global growth, and natural gas imports declined within the same time frame.
The problem facing Chinese authorities and businesses looking for a strong post-COVID economic rebound was highlighted by the recent official manufacturing purchasing managers' index for April, which indicated a steep contraction in new export orders.
While providing some solace, China's first quarter GDP results from last month also cast doubt on the demand forecast due to the country's struggling real estate market, decreasing prices, and rising bank savings.
After miserably failing to achieve its 2022 goal, the government has intensified a number of policy support measures and now has a modest GDP growth target of roughly 5% for this year.
"The global economy is deteriorating and will weaken China's manufacturing sector," said Iris Pang, chief China economist at ING.
"It is looking more likely that, in response, the government will step in to support the manufacturing sector's labour market through fiscal stimulus."