BEIJING, July 13 (Reuters) – China’s exports fell last month at the fastest pace since the start three years ago of the COVID-19 pandemic, as an ailing global economy puts increasing pressure on Chinese policymakers for new stimulus measures.
Momentum in China’s post-pandemic recovery has waned after a rapid recovery in the first quarter, with analysts now downgrading their forecasts for the economy for the rest of the year as factory output slows in the face 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, data from China’s customs bureau showed on Thursday, following a 7.5% drop in May.
Imports fell 6.8%, steeper than an expected 4.0% decline and last month’s 4.5% decline.
“The global slowdown in commodity demand will continue to weigh on exports,” said Zichun Huang, China economist at Capital Economics, with a further slowdown in exports likely before it bottoms out towards the end of the year.
“But the good news is that the worst of the slowdown in foreign demand is probably already behind us,” she added.
Lv Daliang, a spokesman for the General Administration of Customs, blamed the poor export performance on “a weak global economic recovery, slowing global trade and investment, and increasing unilateralism, protectionism and geopolitics,” in comments at a news conference in Beijing.
Exports to the US – the top destination for Chinese goods – have fallen the most among the biggest trading partners in the first half of the year as diplomatic tensions rise over chip technology and other issues, while exports to Russia have risen sharply, albeit from a modest level.
With exports accounting for about a fifth of the economy and the troubled property sector for about a third, China’s prospects for a rapid recovery have dimmed after covid-related shutdowns hit the economy in 2022.
The government has set a modest GDP growth target of around 5% for this year, having badly missed last year’s target.
“Soft exports and deflationary pressures will increase calls for stimulus, but I don’t think the scale of support will be huge,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
“This is because of fiscal constraints on the government, they have to borrow more to finance bigger expenditures,” he added.
PRESS FOR STIMULUS
Chinese Prime Minister Li Qiang, who took office in March, has promised to roll out policy measures to boost demand and strengthen 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 further currency weakness was expected to be limited as investors turned their eyes to next month’s Politburo meeting and any potential economic stimulus measures.
“The big question in the coming months is whether domestic demand can pick up again without much stimulus,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
Factory activity in China has slowed in recent months, while consumer prices teetered on the edge of deflation in June and producer prices fell at the fastest pace in more than seven years.
Chinese semiconductor imports fell 13.6% in June, slower than the 15.3% drop in May, but signaling limited appetite among Chinese manufacturers for components to be re-exported in finished goods.
Demand for raw materials also showed signs of weakness, with copper imports down 16.4% in June compared to the previous year.
Reporting by Joe Cash and Ellen Zhang; Editing by Edmund Klamann
Our standards: Thomson Reuters Trust Principles.