China’s exports are accelerating even if the outlook remains uncertain

  • China’s July exports rise at a faster pace than expected
  • Imports disappoint again, highlighting weak domestic demand
  • The trade balance hit a record high in July
  • Weak foreign demand adds stress to trade and economic outlook

BEIJING, Aug 7 (Reuters) – China’s export growth unexpectedly accelerated in July,

providing an encouraging boost to the economy as it struggles to recover from a COVID-induced slump, but weakening global demand could start to weigh on shipments in the coming months.

Exports rose 18.0% in July from a year earlier, the fastest pace this year, official customs data showed on Sunday, up from a 17.9% rise in June and beating expectations. analysts for a gain of 15.0%.

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Exports have been one of the few bright spots for China’s economy in 2022, as widespread shutdowns hit businesses and consumers hard and the once-mighty real estate market swings from crisis to crisis.

“China’s export growth surprised on the upside again. (It) continues to help China’s economy in a tough year as domestic demand remains sluggish,” said Zhiwei Zhang, chief economist at Pinpoint. Asset Management.

However, many analysts expect shipments to decline amid cooling global consumption.

A global factory survey released last week showed demand weakened in July, with orders and production indices falling to their weakest levels since the start of the COVID-19 pandemic in early 2020. .

China’s official manufacturing survey said activity contracted last month, raising concerns that the economy’s recovery from the spring lockdowns will be slower and bumpier than expected. Read more

But there were signs that transportation and supply chain disruptions caused by COVID restrictions were continuing to ease, just in time for shippers to prepare for the peak in demand for end-of-week purchases. year.

Container throughput for foreign trade at eight major Chinese ports rose 14.5 percent in July, accelerating from the 8.4 percent gain in June, according to data released by the National Ports Association.

Container throughput in the COVID-hit Shanghai port hit an all-time high in July.

July exports may also have been boosted by pent-up demand from Southeast Asia as supply eased and factories ramped up production there, chief economist Bruce Pang said. and head of research at Jones Lang Lasalle Inc, in a research note.

Also, amid soaring inflation, some European and American customers might have placed orders ahead of the holiday season to ensure they had goods on hand, he added.

Still, while export growth remained high, mainly supported by price factors, the volume of exported goods fell in July, said Chang Ran, senior analyst at the Zhixin Investment Research Institute.

“As for the second half of the year, exports should be resilient in the near term, but weaker external demand could put them under pressure in the fourth quarter,” Chang said.

ALWAYS FAST IMPORTS

After a shaky second quarter, most analysts expect Chinese import momentum to pick up slightly in the second half of the year, supported by construction-related equipment and raw materials as the government is increasing infrastructure spending.

But imports last month were weaker than expected again, suggesting domestic demand remains weak.

Imports rose 2.3% from a year earlier, compared to June’s 1% gain and missing a forecast of a 3.7% rise.

“Despite a surge in domestic demand amid the easing of COVID control measures, weak performance on the production side weighed on imports,” said Xu Shuzheng, a researcher at CITIC Securities, adding that new COVID outbreaks could hamper the recovery of the economy.

Crude oil imports in July fell 9.5% from a year earlier as demand for fuel recovered slower than expected due to virus outbreaks.

The volume of imported integrated circuits – a major Chinese import – also fell 19.6% in July from a year earlier, according to Reuters calculations.

This may be an additional red flag for exports, as a significant portion of the country’s imports are components of goods which are then re-exported.

China posted a record trade surplus of $101.26 billion last month, well above the $90.0 billion surplus that analysts had expected.

The country’s top economic planner said last week that the economy was in the “critical window” for stabilization and recovery, and that the third quarter was “vital”. Read more

Top leaders recently signaled they were set to miss the government’s growth target of around 5.5% for 2022, which analysts said looked increasingly out of reach after the economy shied away from just a contraction in the second trimester. Read more

In late July, the International Monetary Fund sharply cut its growth forecast for China in 2022 to 3.3% from 4.4% in April, citing COVID shutdowns and a worsening crisis in the country’s property sector. . Read more

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Reporting by Ellen Zhang and Ryan Woo; Editing by Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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