World economy: China’s exports plummeted unexpectedly

World economy: China’s exports plummeted unexpectedly

Poor prospects for the second largest economy: the important export machinery is running out of steam. Only trade with a certain country really flourishes.

Weak global demand caused China’s exports to plummet unexpectedly. Exports in May fell by 7.5 percent in US dollars compared to the same period last year, as reported by the customs administration in Beijing.

The decline was particularly sharp compared to the previous month, when an increase of 8.5 percent was recorded. The surprisingly clear slowdown in foreign trade is raising new concerns about the hoped-for economic recovery in the second-largest economy.

Chinese exports to Russia alone, which is subject to international economic sanctions because of its war against Ukraine, have risen sharply. Exports to the neighboring country even more than doubled by 114.3 percent in May.

Imports from Russia increased by 10.1 percent. Since the invasion, China has unwaveringly backed Russian President Vladimir Putin and has not condemned his attack to this day.

Chamber of Commerce: Economy still shaky

Imports fell in May for the second month in a row, a sign that the domestic market in China is still weak. The 4.5 percent drop in imports, while less than experts had expected, is striking because the basis of comparison was low a year ago. At that time, the corona lockdown in Shanghai had largely brought China’s largest port to a standstill.

The weakness of the Chinese export machinery is clouding the prospects for growth in the Chinese economy, which initially started the year comparatively well after the end of the strict zero-Covid policy in December. The government in Beijing is planning “around five percent” growth for the year as a whole. In the first quarter, an increase of 4.5 percent was achieved.

“The current trade figures speak for themselves: the Chinese economy is still on shaky ground,” said Jens Hildebrandt, executive board member of the German Chamber of Commerce (AHK) in Beijing. “The business expectations of local companies are also increasingly cautious,” he reported. “In view of this development, a medium-term recovery is even less predictable than before.”

Concerns about the domestic market were growing as early as April, when imports fell by 7.9 percent. In May, important leading economic indicators were worse than expected. The official manufacturing purchasing managers’ index (PMI) declined for the second straight month, falling to 48.8 points from 49.2. A reading below the 50-point line indicates a contraction in industrial activity.

Possible reasons for the weak market

The main reason for the sharp downturn in Chinese exports is the weak momentum on the world markets. High inflation, higher interest rates and excessive energy prices due to the Ukraine war are also impacting demand for products “Made in China”. Foreign trade has fallen by 2.8 percent since the beginning of the year – most recently by 6.2 percent in May, as reported by customs.

German exporters also had to accept a minus in China business. Chinese imports from Germany fell by 3.8 percent. China’s exports to Germany even fell by 8.3 percent.

Similarly, trade with the European Union saw China’s exports to the EU fall 7 percent while imports fell just 0.9 percent. The slump in Chinese trade with the US was even greater. Exports to the largest economy fell 18.2 percent, while imports from the US fell 9.9 percent.

The trade numbers are “further disappointing data that will raise concerns about growth and fuel expectations for more policy support,” Khoon Goh of the Australia and New Zealand Banking Group told Bloomberg. Some observers reckon that the central bank might lower banks’ reserve requirement ratios to support the economy. Others also argue that interest rate cuts may even be necessary soon.

Source: Stern

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest Posts