China faces the highest exports fall in the last three years in June, slumping a worse-than-expected 12.4% year-on-year, these signs mount on stress from the struggling global economy and Chinese policymakers face growing pressure for stimulus measures. Imports also fell more than expected, down by 6.8%, customs data showed.
The momentum in China’s post-pandemic recovery has slowed after the pickup in the first quarter, the analysts are now degrading their projections for the economy for the rest of the year as factory output slows in the face of persistently weak global demand.
The outbound shipments from the world’s second-largest economy slumped a worse-than-expected 12.4% year-on-year in June, this data was shown by China’s Customs Bureau on Thursday, following a drop of 7.5% in May. The imports contracted to 6.8% steeper than the expected 4% decline and the previous month’s fall of 4.5%.
“The global downturn in goods demand will continue to weigh the exports”, said Zichun Huang, China economist at Capital Economics. With the further decline in exports being seen likely before they bottom towards the end of the year. “But the good news is that the worst of the decline in the foreign demand is probably already behind us”, she added.
LV Dailang, a spokesperson for the General Admission of Customs, blamed the poor export performance on “a weak global economic recovery, slowing global trade and investment, and rising unilateralism, protectionism, and geopolitics,” in his comments at a news conference in Beijing.
Exports to the US, the top destination for Chinese goods have fallen the most among the major trading partners over the first half of the year, as the diplomatic tension builds up on the chip technology and other issues, the exports to Russia have risen sharply from a modest level.
The exports account for about one-fifth of the economy and the troubled property sector for about one-third, China’s prospects have dimmed for a quick recovery after the COVID lockdowns battered the economy in 2022.
The government set a modest GDP growth target of around 5% for the year as the last year’s goal was missed badly.
“Soft exports and deflationary pressure will add to calls for stimulus, but I don’t think the scale of support will be enormous.”, said Xu Tianchen, the senior economist at the Economist Intelligence Unit. He also added, “This is owing to fiscal constraints of the government, they needed to borrow more to fund larger expenditure”.
Chinese Premier Li Qiang, who took his post in March, has talked a good game on rolling out the policy measures to boost demands and invigorate markets, but more concrete steps have yet to be announced and investors are growing impatient.
The Chinese Yuan slipped against the dollar after the data was released, the analyst said that further currency weakness was expected but to a limit as investors set their sights on next month’s Politburo meeting and any potential action on economic stimulus.
Zhiwei Zhang, chief economist at Pinpoint Asset Management says, “The big question is whether domestic demand can rebound without much stimulus.”
The factory activity has shrunk in China in recent months while the consumer prices teetered on the edge of deflation in June and producer prices fell at the fastest pace in more than seven years.
The Chinese import of semiconductors fell by 13.6% in June which is slower than the 15.3% drop seen in May but the signaling limited appetite among the Chinese manufacturers for components to re-export in finished goods.
Demand for raw materials shows signs of weakness, Copper imports are down by 16.4% in June compared with last year.
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