The country’s exports fell 12.4% in dollar terms in June from a year earlier, the customs administration said Thursday. That was the second straight month of declines and the biggest drop since the pandemic hit in early 2020. Imports slumped 6.8%, the customs data showed.
That left a trade surplus of $70.6 billion for the month. Economists had forecast that exports would drop 10% while imports would shrink 4.1%.
Global demand had been a strong driver of China’s growth over the past three years, although that began to fade in late 2022. Exports have now fallen for four of the six months so far in 2023.
As global growth slows and as many central banks still seem poised to raise interest rates to push down inflation, it appears increasingly unlikely that foreign demand for Chinese goods will be able to help the world’s second-largest economy as its rebound falters.
“We see little respite for China’s exports in the second half, as the US is likely to enter a mild recession, while the Eurozone economy probably will remain weak,” Duncan Wrigley, chief China economist at Pantheon Macroeconomics, wrote in a note after the data release. “The risk of an escalating technology trade war with the US cannot be ruled out,” Wrigley said. He noted that Beijing’s export restrictions on gallium and germanium, which are used in the semiconductor and electric-vehicle industries, will take effect from next month.The weakness in export demand was widespread. Exports to the US fell almost 24%, the 11th straight month of declines and the worse result since the slump at the beginning of the pandemic.
Shipments to Asean, South Korea, Japan, Taiwan, Germany, Italy, the UK, the Netherlands and Canada all fell by double digits, and shipments to France were also down.
“External uncertainties are rising, and the global economy’s weak momentum and outlook of slowing growth is not improving yet,” said Bruce Pang, chief economist and head of strategy for Greater China at Jones Lang LaSalle Inc.
“The impact from unleashing earlier pent-up orders is basically gone,” although exports of goods such as electric cars and batteries continues to improve, he said.
China’s shares rose on Thursday as Asia equities broadly gained. The mainland’s benchmark CSI 300 Index closed 1.4% higher, the biggest increase in a month, while Chinese shares traded in Hong Kong climbed 2.6% as of 3:55 p.m. local time. The offshore yuan was little changed at 7.1658 per dollar.
Unbalanced Trade
The import data underscores the weakness of the domestic economy and the impact of the tech war with the US and its allies. Demand in China for electronic parts from Taiwan and South Korea, along with commodities from elsewhere, is still down. Soybean, copper ore and concentrated copper, iron ore and natural gas imports all fell from May.
That has left the nation’s trade increasingly unbalanced, with the surplus in the first six months at a record for that period in data back through the late 1990s.
What Bloomberg Economics Says …
“The deeper decline in China’s exports in June drives home a painful message — a global economy that’s weakening won’t offer much support for China’s struggling recovery. A bigger drop in imports highlights weakening domestic demand — and the need for forceful policy support.”
-Eric Zhu, economist
“The weakening external demand continues to impact China’s trade,” said Lyu Daliang, spokesman of the the General Administration of Customs. “The global economy’s recovery is lacking a driver. Global trade and investment is slowing, while unilateralism, protectionism and geopolitical risks are rising.”
The government is looking to increase stimulus to support domestic growth — and the trajectory of global demand through the rest of the year will be an important factor for Beijing to determine how much help is needed.
“Take trade and other data together, we see reasonable chance of measured stimulus,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. He expects imports to outperform exports in the second half of the year on a moderate domestic recovery, and commodity prices to be less of a drag.
