China’s export growth suffered a sharp slowdown from July and was well short of expectations – Copyright AFP Jade GAO
China’s export growth slowed significantly in August, customs authorities said Wednesday, as economic uncertainty is exacerbated by strict Covid-19 lockdowns across the country.
The weakness in trade comes as global demand for Chinese products weakens with energy prices soaring and the United States facing the threat of recession.
At the same time the domestic property sector — which accounts for about a quarter of the world’s number-two economy — continues to struggle with firms staggering under vast amounts of debt.
Overseas shipments increased 7.1 percent on-year, against 18 percent growth in July, China’s General Administration of Customs said, while imports were up only 0.3 percent, compared with a 2.3 percent.
Analysts surveyed by Bloomberg forecast export growth of 13 percent and a 1.1 percent increase in imports.
Sporadic Covid-19 lockdowns around China have dampened consumer enthusiasm and business confidence, while searing temperatures across large parts of the country this summer prompted power rationing for factories.
China’s factory activity shrank for the second month in a row in August, but officials are showing few signs of relaxing strict pandemic curbs, with southwestern megacity Chengdu locking down its 21 million inhabitants last week.
And while officials have announced a range of measures aimed at bolstering the economy, commentators warned that there will not likely be any concerted recovery until the tough Covid measures are removed for good.
“As rising energy prices and monetary policy tightening hit US and Western European households, demand for Chinese manufacturing exports is cooling,” Rajiv Biswas, APAC Chief Economist at S&P Global Market Intelligence told AFP.
Biswas said he expected these factors to continue dampening Chinese exports for the rest of the year, while the country faces “continued weak domestic demand due to the ongoing impact of pandemic-related restrictive measures on consumer spending as well as the residential construction slowdown”.
“Single-digit export growth is more likely for the rest of the year,” Zhang Zhiwei, chief economist at Pinpoint Asset Management, told Bloomberg News.
Chinese leaders had originally set a full-year GDP growth target of around 5.5 percent, but with economic expansion of just 0.4 percent in the second quarter, analysts believe it is unlikely to hit that goal.
Michael Hewson of CMC markets said the latest figures “merely serve to underscore how weak domestic demand still is, and how far away that end of year GDP target of 5.5 percent is”.
“The target may well have been downgraded to an aspiration only last month, but it’s further away than ever after today’s data and we could be lucky to see half that number at this rate.”
Nomura analysts on Tuesday lowered their 2022 growth forecast for China to 2.7 percent from an earlier estimate of 2.8 percent, with nearly every province in the country fighting Covid outbreaks in recent days.
“The picture is not pretty, as China continues to battle the broadest wave of Covid infections thus far,” analysts wrote in a note.
At the same time, China’s property market, a major driver of growth, is struggling with a debt crisis and disruptions to construction.
China’s central bank last month cut the five-year Loan Prime Rate — a benchmark for mortgages — in an effort to boost the flagging sector.