China’s Exports and Imports Show Slowdown in Contraction

At the end of September, a decrease in the slowdown in China’s exports and imports was recorded.

China’s Exports and Imports Show Slowdown in Contraction

The fact that the negative dynamics of these indicators demonstrate a decreasing degree of intensity is evidenced by the data that were released on Friday, October 13 by the Chinese customs. The slowdown in the fall of exports and imports is recorded in this Asian country for the second month in a row. According to some experts, the current dynamic is a kind of sign of gradual stabilization of the world’s second-largest economy. The improvement in results is largely due to the political support measures taken by Beijing.

Experts also believe that the trade report, which indicates an improvement in the situation in the economic sector, which is still not positive in a large-scale sense, may become a kind of incentive for the Chinese authorities to take further actions to ensure conditions for the subsequent development of the mentioned sphere. At the same time, Beijing’s efforts are significantly complicated by such negative factors as the ongoing deflationary pressure, the crisis in the area of real estate, which has dragged on beyond optimistic expectations and has no signs of ending soon without a large-scale impact on other industries, slowing global growth and geopolitical tensions, characteristic of the space of international relations in general and the state of affairs in the dimension of interaction between the United States and China in particular.

Based on September results, Chinese exports showed a decline of 6.2% year-on-year. At the same time, in August, the fall in this indicator was 8.8%. Also, the September result was better than the forecast of economists, who expected a decrease in the volume of supplies to other countries by 7.6% in the first month of autumn.

The customs data was confirmed by new export orders in the factories survey, published two weeks ago, and confirmed the improvement of the situation in this sphere. Experts say that the September result is partly due to seasonal factors such as the supply of Christmas goods, and a favorable base effect.

Xu Tianchen, senior economist at the Economist Intelligence Unit, says there are now more and more signs that the cyclical upswing in the global electronics sector is leading to a drop in world trade. According to him, data on imports and exports in China confirm this vision of the current situation. He also stated that there are currently grounds for optimism about the prospects of the sphere of trade next year.

Exports of products from South Korea to China, which is the main indicator of Beijing’s imports, in September, showed the slowest rate of decline in the last 11 months. Semiconductors are a kind of subject of increased interest in Chinese companies. This interest is natural in the context of the desire to develop and expand high-tech production. Chinese companies consider semiconductors as a kind of raw material for subsequent re-export in the form of finished products.

The September activity indicator presented by the Baltic Dry Index also indicates an improvement in the situation in the world trade area following the results of last month.

At the same time, Lv Daliang, spokesman of the General Administration of Customs, during a press conference held on October 13, said that China’s imports and exports are currently being carried out against the backdrop of difficult and harsh external conditions.

The gradual recovery of domestic demand has become a favorable circumstance for Chinese imports, which decreased by 6.2% year-on-year in September. This indicator did not meet the expectation of a slowdown in the fall to 6%. But at the same time, the September result significantly surpassed in a positive sense the August decline of 7.3%.

Last month, China’s trade surplus amounted to $77.71 billion. Initial expectations regarding this indicator by the end of September were fixed at $70 billion. In August, China’s trade surplus was $68.36 billion.

Experts say that the current favorable trends indicating a gradual improvement in the situation in the Chinese economy sector are not signs of guaranteed growth in the foreseeable future and should not be perceived as evidence of an increase in domestic demand in the coming months. According to them, at present, the strong influence of such factors as the already mentioned crisis in the sphere of real estate, uncertainty in the labor market, lack of a clear understanding of the further dynamic of household incomes, and a low level of confidence among private companies, continues. Experts note that all these circumstances form something like a risk base for the prospects of restoring the economic system.

The Chinese economy, whose total monetary volume has been estimated at $18 trillion, is currently in a state that has nothing to do with what can be called sustainable development. In the second quarter of this year, the restoration of this system was recorded, which is at the same time a kind of measurement of the existence of the state, but this process turned out to be short-term and became something like an outbreak the background of the gradual normalization of life after the coronavirus pandemic. Beijing has been forced to take measures to accelerate the development of the economy, which has suffered from a low level of activity in the housing market, significant youth unemployment, and growing mounting local debt repayment pressure.

In China, a drop in consumer prices was recorded. The selling cost of products at factories decreased at a faster pace than expected. Official data released on October 13 indicate that the deflationary pressure factor remains in the Chinese economic sector.

Beijing also has some reasons to calm down, which still cannot be significant against the background of more sensitive issues. In China, optimistic production activity and positive dynamic of retail sales are recorded. Also last Golden Week, traditionally dedicated to the celebration of mid-autumn and the People’s Republic of China (PRC) Education Day, tourist trips increased by 4.1% compared to the figure recorded before the coronavirus pandemic.

As part of efforts to achieve the Chinese economy’s growth target of about 5% per year, Beijing is exploring the possibility of issuing at least 1 trillion yuan ($137 billion) of additional sovereign debt to finance infrastructure projects. The media, citing insiders, reported this week that China is preparing for another round of stimulating the economic sector.

In recent months, many analysts have been saying that Beijing will have to take more comprehensive measures to restore the economy. They also noted that the current tactics of point solutions will not allow to correct the situation on a full scale.

Robert Carnell, regional head of research Asia-Pacific at ING, says that by the end of 2023, significant growth in China’s economy will not be recorded, since the corresponding recovery process will not be fast. In his opinion, Beijing’s current measures should be characterized as an analgesic tool for the transition to an economic system with a lower share of borrowed funds.

As we have reported earlier, Real Estate Crisis to Stop Development of China’s Economy for Years.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.