The background
Economists had expected trade numbers for August to be slightly worse. A Portal poll forecast that exports fell 9.2 percent and imports fell 9 percent in August from a year earlier. Exports fell by 14.5 percent in July compared to the previous year.
Many multinational companies, particularly large retailers in the United States, are concerned about the dependence of their supply chains on China as geopolitical tensions have increased in recent years and international trade disputes, particularly between the United States and China, have intensified.
China’s drastic “zero Covid” measures during the pandemic, particularly the weeks-long lockdowns of Shanghai, Shenzhen, Guangzhou and other major industrial centers and ports, led to numerous shipping delays as well as the exodus from China of many overseas managers of multinational companies.
As pandemic concerns now ease, households around the world, including in China, have shifted their spending patterns to travel, restaurant meals and other services. Many had stocked up on industrial goods during the pandemic, often from China, which has by far the largest factory sector in the world.
Why it matters
Each month, export and import statistics provide one of the first indications of how the Chinese economy fared in the previous month. China relies heavily on running very large trade surpluses every month to create tens of millions of jobs, and that has become particularly important this year as youth unemployment has soared.
Exports have become even more important in recent years as China faces a sharp slowdown in the real estate market after years of rampant speculation caused housing prices to rise 10-fold or more in many Chinese cities.
The data released on Thursday was the latest sign that overall demand for Chinese goods may have bottomed out. “Fewer poor exports and imports reinforce our belief that July was likely the darkest hour for economic activity in China,” said Louise Loo, an economist in the Singapore office of Oxford Economics, a consultancy.
Although China’s exports have been weak this year, they are falling from very high levels reached during the pandemic. The country remains an industrial powerhouse.
“Export orders for the US or Europe don’t look good, but they are increasing significantly in Asia and elsewhere,” said a recent research note from China Beige Book, an economic research group.