The imports and exports of the second largest economy are falling somewhat more slowly than in the previous month. German companies remain skeptical about their prospects in China.
China’s foreign trade has been on the decline for months – but now there is hope that the worst may be over. As the Beijing customs authorities announced, Chinese exports and imports fell significantly again in August. However, the decline was smaller than analysts had feared.
According to official information, exports from the second largest economy fell by 8.8 percent year-on-year. Imports fell by 7.3 percent, resulting in a decline of 8.2 percent for overall foreign trade. However, compared to the previous month, Chinese trade increased by 3.2 percent.
Despite signs of stabilization, the German Chamber of Commerce (AHK) in Beijing commented cautiously on the figures. The mood among companies active in China remains subdued. “The combination of weak consumer confidence in China and the economic weakness in important sales markets is affecting foreign trade,” said Jens Hildebrandt, executive board member of the chamber: “Imports from Germany in particular have declined.” The government is helping companies with tax breaks. But “more substantial measures” are needed.
According to the Beijing Statistics Office, mutual trade with Germany fell by 13.9 percent compared to the previous year. The decline was even more significant than in trade between China and the USA, where the decline was 9.2 percent.
China and USA in trade dispute
The two largest economies have been in a bitter trade dispute for years. With the announcement this week that it would extend existing special tariffs, the USA made it clear that the conflict will continue.
Asked about the US’s extension of import tariffs on certain Chinese products until the end of this year, Foreign Office spokeswoman Mao Ning said on Thursday: “Basically, we always reject tariff wars. We believe that no one will win a tariff war. The unilateral imposition of Tariffs by the US are not good for China, the US and the world.”
After a strong start to the year, the Chinese economy has recently cooled down significantly. Growth is falling short of expectations, although economists had expected a strong recovery after the end of strict pandemic measures.
Ongoing real estate crisis in China
The main concern at the moment is that Beijing does not seem to be able to get the country’s real estate crisis under control. Many real estate developers, who have become heavily indebted in the hunt for more and more profits and have often built to meet demand, no longer know how to pay back the money they borrowed. Evergrande alone, the country’s largest developer, has accumulated debts of over $300 billion.
Uncertainty is spreading among people because the value of their condominiums is falling. This is also noticeable at the checkout. Many Chinese people are restrained when it comes to consumption. Above all, the pandemic and the government’s tough regulatory measures, for example in the technology or real estate sectors, but also geopolitical risks are clouding the population’s economic prospects. There is also disappointment that the leadership in Beijing is foregoing large aid packages for the economy in the current downturn.
Source: Stern
