China trade weakens after cities shut down to fight virus

Beijing –

China’s April export growth slumped as global demand declined, adding pressure to the world’s second largest economy.

According to customs data, exports rose 3.7% over a year ago to US$273.6billion, which is a sharp drop from March’s 15.7per cent growth. Due to weak Chinese demand, imports rose 0.7% to US$222.5 million, which is in line with the previous month’s growth of 1%.

High inflation in the United States, as well as interest rate increases in other major markets, are putting pressure on Chinese exports. There is also consumer uncertainty regarding the economic outlook and future job prospects.

Investors and companies worry that the “zero COVID” strategy of the ruling Communist Party, which temporarily shut down most businesses in Shanghai and other industrial centres, will result in a disruption in global trade and activity in autos and electronics.

“Virus disruptions continued taking a toll, but the main headwind for exports is weakening global demand,” saidJulian Evans-Pritchard from Capital Economics, in a report. “We expect export volumes will fall further in the next quarters.”

Forecasters anticipate that Chinese industrial activity will increase this month as the infection rate decreases. But President Xi Jinping last Wednesday affirmed Beijing’s commitment to “zeroCOVID,” which raises concerns about how it might impact manufacturing, retailing, trade, and other activities.

Despite tariff hikes that have been ongoing in the fight against Beijing’s technology ambitions, exports to the United States increased 9.5% to US$46billion. American goods imported rose by 0.9% to US$13.8billion.

China’s global trade surplus rose by 19.4% to US$51.1 Billion. However, the US politically volatile surplus fell by 65% to US$9.8 Billion.

China’s latest outbreaks have seen a relatively small number of cases, but Beijing’s determination to isolate every person infected has kept many of Shanghai’s 25,000,000 people in their homes. Access to Guangzhou in the south and Changchun in northeast China was suspended.

Although authorities have relaxed controls in Shanghai, allowing millions of people to leave their homes, restrictions remain in Beijing and other cities.

Port of Shanghai managers, one of the busiest ports in the world, claim it is operating normally. However, figures they provide for daily cargo volume are down 30% from the norm. Shippers fear that there won’t be enough truck drivers to transport their goods so they are trying to avoid the port.

Manufacturers of auto factories and other manufacturing companies that tried to maintain operations by keeping their staff at work were forced to stop or reduce production due to disruptions in supply.

China’s economy expanded by just 4.8 percent in the March quarter compared to a year ago. This is a significant increase from the 4% recorded in the last three months of 2021. Anti-virus controls will put more pressure on activity during the April-June quarter, according to economists.

Official Chinese debt reduction campaign has slowed consumer demand for imports. The vast real-estate industry in China supports millions of workers. This led to an economic slowdown during the second half 2021.

Weak Chinese demand can lead to global consequences, reducing imports of iron ore, oil, and industrial components, as well as depressing consumer goods.

The 27-nation European Union saw an 8 percent increase in exports to US$43.1billion. However, imports of European goods increased 12.5 percent to US$23.4billion. China’s trade surplus with Europe increased by 49.6% to US$19.6billion

Russia was a major supplier to the US and its imports rose 56.6 percent over last year to US$8.9billion. This may be due to an increase in energy prices caused by jitters about supply disruptions.

Beijing has condemned financial and trade sanctions against Moscow imposed by the United States, Europe, and Japan. However, Chinese companies seem to be able to abide by these sanctions while trying to protect against any losses in their dealings with Russia.