China’s trade plummets, threatening recovery prospects

BEIJING, Aug 8 (Reuters) – China’s imports and exports fell much faster than expected in July as weaker demand threatens recovery prospects in the world’s second-largest economy, increasing pressure on exports. authorities release new stimuli for constant growth.

The dismal trade figures reinforce expectations that economic activity could slow further in the third quarter, with activity in construction, manufacturing and services, foreign direct investment and industrial profits weakening.

Imports fell 12.4% year-on-year in July, customs data showed on Tuesday, missing an expected 5% drop in a Reuters poll and a 6.8% drop in June. Meanwhile, exports contracted 14.5%, steeper than the expected 12.5% ​​drop and the previous month’s 12.4% drop.

The pace of decline in exports was the fastest since the start of the pandemic in early 2020 and the fall in imports was the biggest since January this year, when COVID infections shuttered stores and factories.

While the weakness in the value of imports reflects weak demand, falls in commodity prices have also exacerbated overall declines, analysts say.

“Most measures of export orders point to a much larger drop in foreign demand than has been reflected in customs data so far,” said Julian Evans-Pritchard, head of China economics at Capital Economics. .

“And the near-term outlook for consumer spending in developed economies remains challenging, with many still at risk of recessions later this year, albeit mild ones.”

The yuan hit a three-week low and Asian stocks and the Australian and New Zealand dollars, seen as indicators of Chinese growth, weakened after the data.

ADDED PAIN

China’s economy grew at a sluggish pace in the second quarter as demand weakened at home and abroad, prompting top leaders to pledge more political support and analysts to lower their growth forecasts for year.

The value of China’s exports fell 5% year-on-year in the first half of the year despite total cargo throughput rising 10% a year in the second quarter and 8% in the first, according to Fitch.

The headline import figure was worse than expected because “economists may be misinterpreting underlying commodity price factors, which dominate Chinese imports,” said Xu Tianchen, a senior economist at The Economist Intelligence Unit.

“For example, China is importing more oil but at lower prices, as a result the volume of crude accelerated in July, but the value of imports slowed. A similar logic applies to grains and soybeans.”

Crude shipments to the world’s largest oil importer were 17% higher in July than the same period last year, but fell 18.8% from the previous month at the lowest daily rate since January, while soybean imports in July rose 23.5% from a year earlier, thanks to the almost record production in Brazil.

Exports to the United States, the top destination for Chinese goods, fell 23.1% year-on-year, while shipments to the European Union fell 20.6%, as diplomatic tensions over chip technology and the “derisking” of China.

South Korea’s exports to China, a leading indicator of China’s demand for global goods, fell 25.1% in July from a year earlier, the steepest drop in three months.

Beijing is looking for ways to boost domestic consumption without easing monetary policy too much lest it trigger large capital outflows.

the state planner last week Such a stimulus would be available, but so far investors have been disappointed by proposals to expand consumption in the auto, real estate and service sectors.

Reporting by Joe Cash. Edited by Sam Holmes

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