China’s exports experienced a significant decline last month, marking an economic downturn that hasn’t been seen since the beginning of the COVID-19 pandemic. As a result, Chinese policymakers are facing pressure to implement new stimulus measures in response to the challenges faced by the global economy.
Although China’s economic recovery showed signs of improvement in the first quarter after the pandemic, it has been consistently declining since then. Analysts predict a gloomy outlook for the rest of the year, attributing the decline to weakened global demand and a decrease in the country’s factory output.
Recent data from China’s Customs Bureau revealed a 12.4 percent year-on-year drop in exports in June, following a 7.5 percent decrease in May. Imports were also affected, contracting nearly 7 percent, a higher rate than the anticipated 4 percent decline, which followed a 4.5 percent drop in May.
Zichun Huang, a China economist at Capital Economics, believes that the situation will likely worsen before it improves. She predicts a further decline in exports before they eventually stabilize towards the end of the year. However, Huang also notes that the worst decline in foreign demand may already be over.
Lyu Daliang, a spokesperson for the General Administration of Customs, attributes China’s poor export performance to a weak global economic recovery that has affected global trade and investment. He also cites rising unilateralism, protectionism, and geopolitics as contributing factors. The United States has been particularly affected, with diplomatic tensions hindering trade, while exports to Russia experienced a moderate boost.
China’s hopes for a quick post-COVID recovery have faded significantly. The country implemented strict lockdown measures last year, dealing a heavy blow to its economy. This is further exacerbated by failing exports, which make up about 20 percent of China’s economy, and a troubled property sector, which accounts for just over 30 percent. In light of this, the Chinese regime has set a more conservative GDP growth target of around 5 percent for this year after missing last year’s target by a large margin.
Despite promises by Chinese Premier Li Qiang to implement new policy measures to stimulate demand and invigorate markets, little progress has been made, causing investor anxiety. After the release of the export data, the Chinese yuan depreciated against the dollar, but analysts believe that the drop will be limited as investors anticipate potential measures to stimulate the economy after next month’s Politburo meeting.
The decline in production has had a severe impact on consumer prices, almost leading to deflation. Additionally, producer prices have fallen at the fastest rate in over seven years. In terms of imports, semiconductor imports dropped by nearly 14 percent last month, indicating a downturn in Chinese manufacturers’ re-exporting of components in finished goods. There has also been a slowing demand for raw materials, with copper imports declining by over 16 percent in June compared to the previous year.
In conclusion, China’s exports have experienced a significant decline, prompting calls for stimulus measures. The country’s economic recovery has slowed, and challenges such as weakened global demand and declining factory output have contributed to the situation. The Chinese government is under pressure to implement measures to boost demand and invigorate markets, but progress has been limited so far.