BEIJING, July 13 (Portal) – China’s exports contracted last month at their fastest pace since the start of the COVID-19 pandemic three years ago, as an ailing global economy puts increasing pressure on Chinese policymakers to enact fresh stimulus measures.
The momentum of China’s post-pandemic recovery has slowed after a sharp pick-up in the first quarter, and analysts are now lowering their forecasts for the economy for the remainder of the year as factory production slows amid persistently weak global demand.
Outbound shipments from the world’s second-biggest economy slumped 12.4% year-on-year in June, more-than-expected, data from China’s customs agency showed on Thursday, after falling 7.5% in May.
Imports shrank 6.8%, stronger than the expected 4.0% decline and the previous month’s 4.5% drop.
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“The global decline in demand for goods will continue to weigh on exports,” said Zichun Huang, China economist at Capital Economics, with exports likely to fall further before bottoming out towards the end of the year.
“But the good news is that the worst of the contraction in external demand is probably already behind us,” she added.
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Lv Daliang, a spokesman for the General Administration of Customs, in comments at a news conference in Beijing, attributed the poor export performance to “a weak recovery in the global economy, a slowdown in global trade and investment, and rising unilateralism, protectionism and geopolitics.”
Exports to the United States — the top destination for Chinese goods — fell the most among major trading partners in the first half of the year as diplomatic tensions rise over chip technology and other issues, while exports to Russia rose sharply from one modest level.
With exports accounting for about a fifth of the economy and the struggling real estate sector accounting for about a third, China’s prospects for a quick recovery have clouded after the COVID-related lockdowns battered the economy in 2022.
The government has set a modest GDP growth target of around 5% for this year after falling well short of last year’s target.
“Slacking exports and deflationary pressures will fuel calls for stimulus measures, but I don’t think the level of support will be huge,” said Xu Tianchen, chief economist at the Economist Intelligence Unit.
“This is due to government fiscal constraints. She needs to borrow more to fund bigger expenses,” he added.
PRESSURE TO Stimulus
Chinese Premier Li Qiang, who took office in March, has promised policy measures to boost demand and stimulate markets, but few concrete steps have been announced and investors are growing impatient.
The Chinese yuan slipped against the dollar after the data was released. However, analysts said further currency weakness is likely to be limited as investors focus on next month’s Politburo meeting and possible stimulus measures.
“The big question over the next few months is whether domestic demand can pick up again without much stimulus,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
Factory activity in China has slowed in recent months, while consumer prices teetered on the brink of deflation in June and producer prices fell at their fastest rate in more than seven years.
China’s semiconductor imports fell 13.6% in June, slower than May’s 15.3% decline, but suggesting Chinese manufacturers have limited appetite for components to be re-exported as manufactured goods.
Demand for commodities also showed signs of weakness, with copper imports falling 16.4% yoy in June.
Reporting by Joe Cash and Ellen Zhang; Edited by Edmund Klamann
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