China’s trade falters as demand declines at home and abroad

Join now for FREE unlimited access to Reuters.com

  • China’s single-digit export growth beats forecasts
  • Imports are lagging, reflecting weak demand
  • Trade balance tightens from July record
  • Booming business momentum set to weaken

BEIJING, Sept 7 (Reuters) – China’s exports and imports lost momentum in August as growth fell sharply from expectations as soaring inflation crippled foreign demand and fresh COVID curbs and heat waves disrupted production, rekindling downside risks for a faltering economy.

Exports rose 7.1% in August from a year earlier, slowing from an 18.0% gain in July and marking the first slowdown since April, official data showed Wednesday, well below analysts’ expectations for a 12.8% increase.

Outbound shipments have outperformed other economic drivers this year, but now face increasing challenges as rising interest rates, inflation and geopolitical tensions weigh on external demand.

Join now for FREE unlimited access to Reuters.com

Disappointing August trade data rattled global financial markets, which have already faltered on the rising dollar and the prospect of much higher US interest rates. Read more

“It looks like the weakness in exports has come sooner than expected as recent shipping data suggests 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 the price effects to continue to disrupt trade and said real import growth had already turned negative since the end of the first quarter, suggesting more headwinds for demand.

Reacting to the disappointing data, the Chinese yuan extended its losses, losing 0.36% to 6.98 to the dollar and approaching the psychologically crucial 7 mark. Read more

Although it has hovered around its lowest level in two years, the weakening yuan has failed to give Chinese exports the competitive edge they need to offset slowing external demand.

Slower growth is also partly due to unflattering comparisons to strong exports last year, but also compounded by more COVID restrictions as infections rose and heatwaves disrupted factory output in the southwestern regions.

The Yiwu export hub imposed a three-day lockdown in early August to contain a COVID outbreak, disrupting local shipments and the delivery of Christmas goods during the peak season.

Contrary to the general trend, auto exports remained robust in August, jumping 47% from a year earlier, according to Reuters calculations based on customs data.

An aerial view shows containers and cargo ships at the port of Qingdao in Shandong province, China, May 9, 2022. Photo taken with a drone. China Daily via REUTERS

In the first eight months, China exported 1.9 million car units, up 44.5 percent, supported by strong demand for new energy vehicles in Southeast Asia.

IMPORT CONCERNS

Weak domestic demand, weighed down by the worst heat waves in decades, a housing crisis and sluggish consumption, has crippled imports.

Inbound shipments rose just 0.3% in August, down from 2.3% the previous month, well below a forecast increase of 1.1%. Both imports and exports grew at their slowest pace in four months.

Chinese imports of crude oil, iron ore and soybeans all fell as strict COVID-related restrictions and extreme heat disrupted domestic production.

Cooking temperatures, however, led to the fastest increase in coal imports this year, as power generators raced to get extra fuel to meet growing electricity demand.

“The remarkably slower growth in imports indicates that the sector has faced a wave of headwinds in recent months, which is unlikely to subside anytime soon,” said Bruce Pang, chief economist at Jones Lang Lasalle.

“COVID outbreaks have disrupted supply chains and demand, while power rationing measures have hurt production. The general dollar strength is also putting pressure on imports.”

That left a narrower trade surplus of $79.39 billion, down from a record surplus of $101.26 billion in July, marking the lowest since May, when Shanghai emerged from lockdowns.

Chinese policymakers this week signaled a renewed sense of urgency to shore up the flagging economy, saying action was key in the quarter as data points to further loss of economic momentum. Read more

The central bank said on Monday it would reduce the amount of foreign exchange reserves financial institutions must hold, a move aimed at slowing the yuan’s recent decline. Read more

Join now for FREE unlimited access to Reuters.com

Reporting by Ellen Zhang and Ryan Woo; Editing by Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

China’s trade falters as demand declines at home and abroad

Leave a Comment

Your email address will not be published.