China’s imports contracted sharply in April, while exports rose at a slower pace, reinforcing signs of weak domestic demand despite lifting COVID restrictions and heaping pressure on an economy already struggling in the face of cooling global growth, reported Reuters.
China’s economy grew faster than expected in the first quarter thanks to robust services consumption, but factory output has lagged, and the latest trade numbers point to a long road to regaining the pre-pandemic momentum at home.
Inbound shipments to the world’s second-largest economy fell 7.9% year-on-year in April, extending the 1.4% decline seen a month earlier, while exports grew 8.5%, easing from the 14.8% surge in March, customs data showed on Tuesday.
Economists in a Reuters poll had predicted no growth in imports and an 8.0% increase 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.
Government officials have repeatedly warned of a ‘severe’ and ‘complicated’ external environment due to mounting recession risks for many of China’s key trading partners.
The sharp deterioration in last month’s trade flows will only renew worries about the state of external demand and risks posed to the domestic economy, especially given the frail recovery from a year earlier when China’s COVID-19 restrictions severely disrupted inbound and outbound shipments.
“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.
The data appeared to push Hong Kong and mainland Chinese stocks lower, although global factors were also at play.
Hong Kong’s Hang Seng Index was down 1.11% in the early afternoon, while China’s blue-chip CSI300 Index was 0.26% weaker after climbing 0.5% before the lunch break.
The downturn in imports suggests the world economy won’t be able to count much on China’s domestic engine of growth. As the nation re-exports some of its imports, it also reinforces the extent of weakness in some of its major trading partner economies.
A 15.3% drop in the import of semiconductors indicates the scale of the demand-pullback in the re-export market for such parts.
Analysts say the sharp global monetary policy tightening campaign of the past 12-18 months and recent Western banking stress remain concerns for the revival prospects of both China and the globe.
Shipments growth to ASEAN – a block of Southeast Asian countries – slowed to 4.5% in April from 35.4% last month. The region is China’s largest export partner.
Other recent data also showed South Korean exports to China, a leading indicator of China’s imports, were down 26.5% in April, continuing ten consecutive months of decline.
China’s coal imports fell in April from a 15-month high in the prior month, snapping back as demand weakens in the Asian giant. Imports of copper – a proxy for global growth – and natural gas were also down in the same period.
China’s first quarter GDP data last month, while offering some relief, also raised doubts about the demand outlook due to property market weakness, slowing prices, and surging bank savings.
The government, which has stepped up a range of policy support measures, aims for a modest GDP growth target of around 5% for this year after badly missing the 2022 goal.
“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 labor market through fiscal stimulus.”
