China’s exports rise unexpectedly, but economists warn of weakness ahead

BEIJING, April 13 (Reuters) – China’s exports rose unexpectedly in March, with officials flagging growing demand for electric vehicles, but analysts warned that the improvement partly reflected suppliers catching up with unfulfilled orders after last year’s COVID-19 disruption.

Exports in March rose 1[ads1]4.8% from a year ago, snapping five straight months of declines and stunning economists forecasting a 7.0% drop in a Reuters poll.

But analysts said the jump was more likely related to exporters rushing to fulfill a backlog of orders that had been disrupted by the pandemic in recent months, and warned that the outlook for global demand remained muted.

“The wave of COVID outbreaks in December and January probably depleted factories’ inventories. Now that factories are running at full capacity, they caught up with the accumulated orders from the past,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“The strong export growth is unlikely to be sustained given the weak global macro outlook,” he added.

Meanwhile, imports fell less than expected, and economists point to an acceleration in purchases of agricultural products, particularly soybeans, as providing some support.

Imports fell just 1.4%, less than forecasts for a 5.0% decline and a 10.2% decline in the past two months. The increase in imports of crude oil, iron ore and soybeans in the month was offset by a decrease in copper imports.

Financial markets received little cheer from the positive export data as investors remained wary of the outlook, although the Australian dollar, seen as a proxy for Chinese demand for commodities, rose slightly.

Lv Daliang, spokesman for the General Administration of Customs, attributed the positive surprise to the strength in demand for electric vehicles, solar energy products and lithium batteries.

He warned, however, that conditions could worsen in the future.

“The external environment remains serious and complicated at present,” Lv told reporters in Beijing on Thursday. “Slack external demand and geopolitical factors will pose greater challenges to China’s trade development,” he added.

China’s strong performance contrasts with other Asian exporters, such as South Korea and Vietnam, which have both seen export declines in the first months of 2023, adding to doubts that it can be sustained.

“We are not convinced that this recovery will be sustained given the still gloomy outlook for foreign demand,” Capital Economics analysts said in a note.

“We expect most developed economies to slide into recession this year and believe the slowdown in Chinese exports still has some way to go before bottoming out later this year.”

Factory surveys showed export orders fell in March, a contrast to more positive readings for the services sector, which has benefited from China’s reopening.

China’s newly appointed Premier Li Qiang told a cabinet meeting last week that officials should “try all methods” to boost trade with developed economies and push companies to explore emerging market economies, such as those in Southeast Asia.

Beijing has set a growth target of around 5% for gross domestic product (GDP) this year, after severe pandemic controls last year sent the economy to one of its slowest speeds in decades. GDP rose just 3% last year.

Reporting by Joe Cash and Ellen Zhang; Editing by Clarence Fernandez and Sam Holmes

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