The News: China’s Trade Numbers Show Decline, Signaling Economic Rebound Lagging
China’s trade numbers for July have dropped, according to government data released on Tuesday, indicating that the country’s economic rebound is lagging behind despite efforts by officials in Beijing to revive growth.
The decline in exports from China, the world’s second-largest economy, has now continued for three consecutive months, while imports have fallen for five consecutive months. These numbers reflect a decrease in foreign demand for Chinese-made products, declining domestic demand, a real estate crisis, and geopolitical tensions, including the war in Ukraine.
Economists from Nomura predict that exports will likely continue to fall for the remainder of the year.
“These readings point to worsening growth prospects,” they said. “A worsening export contraction means weaker production, while rapidly deteriorating imports reflect weaker demand within China.”
The Numbers: Exports and Imports Show Significant Decline
In July, China’s exports dropped by 14.5 percent compared to the same period last year, marking the largest decline since February 2020 when the world was grappling with the effects of the coronavirus pandemic and disrupted supply chains. Imports also fell by 12.3 percent during the same period.
During the first seven months of this year, exports to the United States declined by 18.6 percent compared to the same period in the previous year, while shipments to the European Union witnessed a 5 percent decrease. In contrast, exports to Russia, under Western sanctions due to the Ukraine invasion, increased by more than 70 percent.
Additionally, China’s position as the top trading partner for the United States has been surpassed by Mexico and Canada this year as American companies aim to bring their supply chains closer to home. Furthermore, foreign investment in China has seen a significant decline of over 80 percent in the second quarter of this year compared to the same period last year, according to Chinese government data released on Friday.
Why It Matters
Developed countries, such as the United States, are attempting to tackle inflation by reducing demand, leading consumers to shift their spending from goods to services, according to Paul Donovan, chief economist at UBS.
“There has been general weakness in demand for China’s exports,” he noted.
Officials in Beijing have been working to facilitate an economic rebound after nearly three years of pandemic-related restrictions. Following the end of lockdowns in China last December, expectations were high for a swift recovery; however, progress has been slow.
The real estate crisis and weak consumer spending have put pressure on Beijing to increase exports in order to stabilize the economy. However, the trade numbers released on Tuesday indicate that weak demand may further contribute to a global slowdown.