- China’s exports in July grow faster, beating expectations
- Imports are again disappointing, highlighting weak domestic demand
- The trade balance hit a record high in July
- Weak external demand is adding pressure to the economic and trade outlook
BEIJING (Reuters) – China’s export growth unexpectedly accelerated in July, providing an encouraging boost to the economy as China struggles to recover from a recession caused by the coronavirus, but weak global demand could start to pressure shipments in the coming months. .
Official customs data on Sunday showed exports rose 18.0% in July from a year earlier, the fastest pace this year, compared with a 17.9% increase in June and above analysts’ expectations for a 15.0% gain.
Outbound shipments were one of the few bright spots for the Chinese economy in 2022, as widespread shutdowns hit businesses and consumers hard, and the once-strong real estate market teetered from one crisis to the next.
Register now to get free unlimited access to Reuters.com
“Chinese export growth has surprised once again on the upside. (It) continues to help the Chinese economy in a difficult year as domestic demand remains sluggish,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
However, many analysts expected exports to fade as the global economy is likely to head for a serious slowdown, weighed down by higher prices and higher interest rates.
A global factory survey released last week showed weak demand in July, with orders and production indicators falling to their weakest levels since the onset of the COVID-19 pandemic in early 2020.
China’s official manufacturing survey indicated a contraction in activity last month, raising fears that the economy’s recovery from the spring shutdown will be slower and more bumpy than expected. Read more
But there were signs that transportation and supply chain disruptions caused by COVID restrictions were continuing to unwind, just in time for shippers preparing for a year-end shopping demand peak.
Foreign trade container production at eight major Chinese ports rose 14.5% in July, accelerating from an 8.4% increase in June, according to data from the local port association.
Container productivity at the coronavirus-hit Shanghai port hit a record high last month.
July exports may also have been boosted by pent-up demand from Southeast Asia as supplies dwindled and factories increased there, Bruce Pang, chief economist and head of research at Jones Lang LaSalle, said in a research note.
Moreover, amid negative real interest rate and rising inflation, some European and American customers may have pre-orders to ensure they have goods on hand at lower costs.
However, while export growth remained high, mainly supported by price factors, the volume of exported goods declined in July, said Zhang Ran, chief analyst at Zhixin Investment Research Institute.
“Looking ahead in the second half of the year, exports are expected to be resilient in the short term, but weak external demand may put pressure on them in the fourth quarter,” Zhang said.
A company executive told Reuters that Chinese exporters are facing mounting headwinds.
“I am very concerned about the effects of high inflation in the United States and rising Sino-US tensions on our export orders,” Jin Chufeng, general manager of Nicesol, one of the largest sellers of bamboo outdoor furniture on Amazon, told Reuters.
“If retaliatory tariffs like the ones under Trump happen again, it will deal a blow to our business,” Jin said, adding that the value of his company’s exports jumped 70-80% in July year-on-year.
Imports are still tepid
After a shaky second quarter, most analysts expected China’s import momentum to increase modestly in the latter half of the year, buoyed by equipment and construction-related goods as the government ramps up spending on infrastructure.
But last month’s imports were again weaker than expected, indicating that domestic demand remains weak.
Imports rose 2.3% from a year earlier, compared to June’s 1% gain and missing expectations for a 3.7% rise.
Xu Shuzheng, a researcher at CITIC Securities, said that despite the slight rise in domestic demand amid the easing of COVID control measures, the weak performance of the production side led to a decline in imports.
Crude oil imports in July fell 9.5% from a year earlier as fuel demand recovered slower than expected due to the new virus outbreak.
According to Reuters calculations, the volume of imported integrated circuits – a major Chinese import – fell 19.6% in July compared to the previous year.
This may be an additional red flag for exports, as much of a country’s imports are components of goods that are then re-exported.
China posted a record trade surplus of $101.26 billion last month, much higher than the $90.0 billion surplus analysts had expected.
The country’s chief economic planner said last week that the economy is in a “critical window” for stability and recovery, and the third quarter is “vital.” Read more
Senior leaders recently indicated that they were ready to miss the government’s growth target of around 5.5% for 2022, which analysts said was looking for an unattainable increase after the economy narrowly avoided a downturn in the second quarter. Read more
The International Monetary Fund in late July sharply lowered its 2022 growth forecast for China to 3.3% from 4.4% in April, citing COVID lockdowns and the deepening crisis in the country’s real estate sector. Read more
Register now to get free unlimited access to Reuters.com
(Reporting by Elaine Zhang and Ryan Woo) Editing by Kim Coogle
Our Standards: Thomson Reuters Trust Principles.