China’s exports fall the most in three years as the world economy falters

BEIJING, July 13 (Reuters) – China’s exports contracted last month at their fastest pace since the start of the COVID-19 pandemic three years ago, as a turbulent global economy put increasing pressure on Chinese politicians to take further stimulus measures.

The momentum of China’s post-pandemic recovery has slowed after a quick rebound in the first quarter, and analysts are now downgrading their projections for the economy for the rest of the year as factory output slows ahead of persistently weak global demand.

Outbound shipments from the world’s second-largest economy fell a worse-than-expected 12.4% year-on-year in June, China Customs Bureau data showed on Thursday, following a 7.5% drop in May. .

Imports contracted 6.8%, steeper than the expected drop of 4.0% and the previous month’s 4.5% drop.

“The global slowdown in demand for goods will continue to weigh on exports,” said Zichun Huang, China economist at Capital Economics, and exports are expected to decline further before bottoming out towards the end of the year.

“But the good news is that the worst of the fall in foreign demand is probably over,” he added.

Lv Daliang, a spokesman for the General Administration of Customs, blamed the poor export performance on “a weak global economic recovery, a slowdown in global trade and investment, and growing unilateralism, protectionism and geopolitics,” in remarks at a conference. press in Beijing.

Exports to the United States, the top destination for Chinese goods, have fallen the most among its major trading partners in the first half of the year as diplomatic tensions mount over chip technology and other issues, while exports to Russia have increased considerably, albeit from a modest level.

With exports accounting for around a fifth of the economy and troubled real estate accounting for around a third, China’s prospects have dimmed for a quick recovery after COVID-related lockdowns hit the economy in 2022.

The government has set itself a modest GDP growth target of around 5% for this year, after missing last year’s target.

“Soft exports and deflationary pressure will add to calls for stimulus, but I don’t think the scale of support will be huge,” said Xu Tianchen, a senior economist at The Economist Intelligence Unit.

“This is due to the government’s fiscal constraints, they need to borrow more to finance higher spending,” he added.

STIMULUS PRESSURE

Chinese Premier Li Qiang, who took office in March, has vowed to implement policy measures to boost demand and invigorate markets, but few concrete steps have been announced and investors are growing impatient.

The Chinese yuan fell against the dollar after the data was released, but analysts said weakness in the currency was expected to be limited as investors set their sights on next month’s Politburo meeting and any potential action on the economic stimulus.

“The big question in the coming months is whether domestic demand can pick up without much stimulus,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

Factory activity in China has been contraction in recent months, while consumer prices teetered on the brink of deflation in June and producer prices fell at their fastest pace in more than seven years.

Chinese semiconductor imports fell 13.6% in June, slower than the 15.3% drop seen in May, but indicating limited appetite among Chinese manufacturers for components to re-export into finished goods.

Demand for raw materials also showed signs of weakness, with copper imports falling 16.4% in June compared to a year earlier.

Reporting by Joe Cash and Ellen Zhang; Edited by Edmund Klamann

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