Chinese export growth slows as global demand stabilizes

(Bloomberg) — China’s export growth moderated in the first two months of the year, pointing to more stable global demand as multiple risks cloud the outlook.

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Exports rose 16.3% in dollar terms in the January-February period from a year earlier, data from the General Administration of Customs showed on Monday, beating the median estimate of 14% for a Bloomberg survey of economists. Exports rose 20.9% in December.

Imports rose 15.5% year on year during the period, below a 17% gain expected by economists. The trade surplus stood at $116 billion.

China’s economic activity is typically volatile in the first two months of the year due to the week-long Lunar New Year holiday. Covid outbreaks in parts of the country have also caused temporary business suspensions this year, although the Department of Commerce said the impact was broadly manageable.

“China’s foreign trade has had a steady start, although the current external environment for the development of foreign trade is more complex and uncertain,” said Li Kuiwen, spokesperson for the General Administration of Customs, according to state media CCTV.

While steel exports fell 19% to 8.23 ​​million metric tons in the first two months of the year compared to the same period last year, the value of shipments jumped 34, 4%, according to the data. Crude oil imports fell 4.9% in volume, natural gas purchases fell 3.8% and soybean imports rose 4.1%, with the value of products purchased all climbing to record highs. double digit rate.

“Given the surge in both export and import prices, we might have to say that trade numbers are expected to be much weaker in real terms,” said Zhou Hao, senior emerging markets economist. at Commerzbank AG. “Export growth is expected to weaken from the second quarter due to a high base, and import growth is rather uncertain as the war in Ukraine could disrupt the supply chain.”

Tensions between Russia and Ukraine and soaring oil prices have turned attention to energy supplies. At a separate National Development and Reform Commission briefing on Monday, Vice President Lian Weiliang said China’s sources of crude oil and natural gas are diverse and a “very high” share is tied to long-term contracts.

The government will focus on solving the problem of semiconductor supply in the manufacturing sector this year after global shortages in 2021, said Lin Nianxiu, another deputy head of the NDRC, at the same press conference. . The volume of imports of diodes and similar semiconductors rose 10.7% in the first two months of the year compared to the same period a year ago.

Car exports grew the fastest in the January-February period, jumping 103.6% in value from a year ago. Those of rare earth products and aluminum have also increased rapidly.

Trade boom

Last year’s record trade helped sustain China’s rapid growth, although economic momentum weakened in the latter part of the year amid a slowing property market. The government has set a growth target of around 5.5% for this year, the lowest in more than three decades, but above economists’ forecasts, suggesting the need for more stimulus, such as interest rate cuts and a further loosening of the housing market’s grip.

Read more: China signals increased political support with 5.5% growth target

What Bloomberg Economics says…

The upcoming picture doesn’t look so benign. A higher base a year earlier will reduce export growth. Progress in the global fight against Covid-19 could lead to a shift in demand towards services away from goods, away from demand for Chinese exports. Additionally, the Russian-Ukrainian war could add headwinds to trade flows, with soaring commodity prices dampening global demand and worsening global supply chain issues.

Eric Zhu, Chinese economist

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Commerce Minister Wang Wentao warned last week of “massive pressure” to maintain high export growth. Factors that drove overseas shipments to soar last year, such as demand for goods to control the spread of Covid, will dissipate as businesses continue to grapple with bottlenecks in the chain. supply, rising commodity prices and labor shortages, he said.

The European Union was China’s biggest trading partner in the first two months of this year, followed by the Association of Southeast Asian Nations and the United States. China’s exports to the United States increased by 13.8%, while imports from these countries increased by only 8.3%.

Government data and a private survey of Chinese manufacturing companies showed new export orders continued to contract last month. Meanwhile, manufacturing activity in Southeast Asian countries has largely improved as virus waves waned in the region, a sign that production orders could once again be diverted from China.

“Export support is expected to decline from the second quarter, partly due to the recovery of the global supply chain,” said Tommy Xie, head of China research at Oversea-Chinese Banking Corp.

(Updates with additional details and comments from economists.)

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