Aerial photo shows containers and cargo ships at the port of Qingdao, east China’s Shandong province, May 9, 2022. Image captured by a drone. China Daily via Portal
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- China’s single-digit export growth misses forecast
- Imports are lagging, reflecting weak demand
- The trade balance narrows from July’s record
- Booming trade momentum expected to weaken
BEIJING, Sept 7 (Portal) – China’s exports and imports lost momentum in August, with growth falling well short of forecasts as rising inflation slammed external demand and fresh COVID slowdowns and heatwaves disrupted output and downside risks to the shaky revived economy.
Exports rose 7.1% yoy in August, slowing from an 18.0% gain in July and marking the first slowdown since April, official data showed on Wednesday, well below analysts’ expectations for a rise of 12.8%.
Outbound shipments have outperformed other economic factors this year but now face growing challenges as rising interest rates, inflation and geopolitical tensions weigh on foreign demand.
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The disappointing August trade numbers rocked global financial markets, already suffering from a strengthening dollar and the prospect of much higher US interest rates. Continue reading
“It appears that the export weakness has arrived earlier than expected, as the latest shipping data suggests that demand from the US and EU has already slowed as shipping prices have fallen significantly,” said Zhou Hao, chief economist at Guotai Junan International.
He expects price effects to continue disrupting trade and said real import growth had already turned negative since late Q1, indicating more headwinds for demand.
In reaction to the disappointing data, China’s yuan extended losses, shedding 0.36% to 6.98 per dollar and nearing the psychological 7 mark. Read more
Despite a weak two-year low, the flagging yuan hasn’t given China’s exports the competitive advantage they need to offset slowing external demand.
The slower growth is also partly due to unflattering comparisons with strong exports last year, but was also worsened by more COVID restrictions as infections rose and heatwaves disrupted factory production in southwestern areas.
The Yiwu export center imposed a three-day lockdown in early August to contain a COVID outbreak, disrupting local shipments and deliveries of Christmas goods during the peak season.
Bucking the general trend, auto exports remained resilient in August, up 47% yoy, according to Portal calculations based on customs data.
In the first eight months, China exported 1.9 million passenger car units, up 44.5%, supported by strong demand for new energy vehicles in Southeast Asia.
IMPORT WORRY
Weak domestic demand, weighed down by the worst heatwaves in decades, a housing crisis and sluggish consumption stunted imports.
Inbound shipments rose just 0.3% in August from 2.3% the previous month, well below a forecast 1.1% increase. Both imports and exports grew at their slowest pace in four months.
China’s imports of crude oil, iron ore and soybeans all fell as tough COVID restrictions and extreme heat disrupted domestic production.
Baking temperatures, however, led to the fastest rise in coal imports this year as power producers looked for additional fuel to meet rising electricity demands.
“The remarkably slower import growth suggests the sector has faced a wave of headwinds in recent months that are unlikely to abate anytime soon,” said Bruce Pang, chief economist at Jones Lang Lasalle.
“COVID outbreaks have disrupted supply chains and demand, while power rationing measures impacted production. The broad dollar strength is also putting pressure on imports.”
That left a smaller trade surplus of $79.39 billion compared to a record surplus of $101.26 billion in July, the lowest since May when Shanghai emerged from lockdowns.
Chinese policymakers this week signaled a renewed sense of urgency to shore up the ailing economy, saying action was crucial in the quarter as data pointed to a further loss of economic momentum. Continue reading
The central bank said Monday it would cut the amount of foreign exchange reserves financial institutions are required to hold, a move aimed at slowing the yuan’s recent slide. Continue reading
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Reporting by Ellen Zhang and Ryan Woo; Editing by Sam Holmes
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