China’s exports in January-February fell, pointing to continued weakness in foreign demand and backing government concerns that a global slowdown will hamper the country’s recovery from pandemic-era damage.
Exports sank 6.8% from a year earlier to $506.3 billion, an improvement over December’s 10.1% decline, customs data showed Tuesday. However, imports fell 10.2% to $389.4 billion, deepening December’s 7.3% contraction.
China’s global trade surplus for the January-February period increased 0.8% over a year earlier to $116.9 billion.
Forecasters expected trade to weaken as the likelihood of a recession in Western economies increased following rate hikes by the U.S. Federal Reserve and European Central Bank (ECB) to cool economic activity and record-setting inflation.
“Given the high inflation in the U.S. and Europe, demand from there should keep weakening, which also dampens the processing demand in China,” said Iris Pang, chief economist for Greater China at ING.
“We don’t expect exports to rebound,” Pang noted.
“The data came as a result of worsening global demand for goods, given the fact that the export decline happened not only in China but also among other major Asian exporters, such as South Korea and Vietnam,” said Xu Tianchen, economist and the Economist Intelligence Unit, referring to other recent data.
A 26.5% plunge in China’s imports of semiconductors indicated a shrunken market for the consumer electronics exports that such parts are used to make.
The latest data adds to complications for President Xi Jinping’s government, which is trying to revive economic growth that sank last year to 3% after severe pandemic controls knocked the economy to its second-weakest rate since the 1970s.
Beijing Sunday set this year’s gross domestic product (GDP) growth target at “around 5%.” At the same time, the ruling Communist Party tries to encourage consumer demand to reduce reliance on exports and investment.
Commerce Minister Wang Wentao on Thursday cautioned downward pressure on China’s imports and exports would increase significantly this year because of the risk of a global recession and weakening external demand.
“In dollar terms, imports declined more than exports, suggesting weak demand in domestic and foreign markets,” said Dan Wang, chief economist at Hang Seng Bank China.
The data lowered Hong Kong and mainland Chinese stocks, erasing earlier gains. Hong Kong’s Hang Seng Index was down 0.33% in late afternoon trading, while China’s blue-chip CSI300 Index was 1.46% weaker.
China’s imports of coal and soybeans jumped from a year before, the customs bureau data showed, while crude oil arrivals were down 1.3%. Imports of natural gas fell by 9.4%.
Exports to the U.S. tumbled 21.8% from a year earlier to $71.6 billion following repeated rate hikes by the Federal Reserve to cool economic activity and surging inflation. Imports of American goods fell 5% to $30.3 billion.
The politically sensitive trade surplus with the U.S. narrowed by 30.9% to $41.3 billion.
Exports to the EU were down 12.2%, with imports dropping 5.5%.
Russia’s oil and gas exports surged 31.3% over a year ago to $18.6 billion. Exports to Russia rose 19.8% to $15 billion.
China, the most significant global energy consumer, has stepped up purchases from Russia to take advantage of price discounts after Washington, Europe, and Japan cut imports to punish President Vladimir Putin’s government for its attack on Ukraine.
China can buy Russian oil and gas without triggering Western sanctions, but Biden has warned Beijing against helping Moscow’s military. China bought about 20% of Russia’s crude exports in 2021 and increased that last year.
The customs agency publishes combined January and February trade data to smooth out distortions caused by the shifting timing of the Lunar New Year, which this year fell in January.
Economists expect imports to recover gradually as consumer confidence returns following the removal of COVID-19 restrictions in December. Still, they say the slowdown abroad could also reduce the volume of goods entering China.
“Imports may take some time to recover,” ING’s Pang said.
In February, manufacturing activity expanded at its fastest pace in over a decade, data from the National Bureau of Statistics showed last week, giving economists cause for optimism.
Factory activity readings from other Asian economies for February were more downbeat, reinforcing views that conditions abroad were more sluggish.
