Imports and exports in China fell at a faster rate than expected in July, raising concerns about the country’s economic recovery. Customs data showed that imports dropped 12.4% compared to the same period last year, missing a forecast fall of 5%. Meanwhile, exports contracted 14.5%, steeper than the expected 12.5% decline. These figures suggest that economic activity could slow further in the third quarter, with construction, manufacturing, and services sectors all weakening.
Analysts attribute the decline in China’s imports to both weak demand and falling commodity prices. However, they believe that the declines in export orders indicate a greater decline in foreign demand than what is reflected in the customs data. The near-term outlook for consumer spending in developed economies remains challenging, with many still at risk of mild recessions later this year.
The weakening trade numbers have prompted calls for fresh stimulus measures to support economic growth. China’s economy grew at a sluggish pace in the second quarter, prompting top leaders to promise further policy support. The value of China’s exports declined 5% in the first half of the year, despite an increase in cargo throughput.
Crude oil shipments to China were 17% higher in July compared to last year, but fell 18.8% from the previous month. Similarly, soybean imports in July jumped 23.5% from a year ago. The decline in exports to the United States and the European Union reflects diplomatic tensions and concerns over chip technology and “de-risking” from China. South Korean exports to China, a leading indicator of Chinese demand for global goods, also fell sharply in July.
Beijing is currently exploring ways to boost domestic consumption without triggering large capital outflows. The state planner has promised stimulus measures, but investors have been underwhelmed by proposals targeting sectors like automobiles, real estate, and services.
Overall, the weak trade numbers highlight the challenges facing China’s economy and the need for further stimulus measures to support growth.