global slowdown dampens exports

published on Wednesday, September 07, 2022 at 08:21

China’s exports and imports stalled in August, penalized by global economic uncertainties as well as the continuation of anti-Covid restrictions that are weighing on the Asian giant’s activity.

The threat of recession in the United States and Europe, combined with soaring energy prices, is weakening demand for Chinese products.

On the epidemic front, China continues to follow a strict so-called “zero Covid” policy which leads to confinements and unexpected closures of factories and businesses. These measures weigh on activity.

In this context, China’s exports increased in August by 7.1% year on year, according to figures released Wednesday by Chinese Customs.

This rate is much lower than that of July (18%).

Analysts polled by the Bloomberg agency had anticipated this slowdown but not to such an extent (13%).

For two years, Chinese exports had largely benefited from the rest of the world’s needs for protection products against Covid-19. But this demand has been declining for many months with the return to normal life in most countries.

Above all, “soaring gas prices are creating considerable economic shocks for consumers in the European Union and the United Kingdom,” said economist Rajiv Biswas, of the firm S&P Global Market Intelligence, to AFP.

– PCR testing –

At a time when demand is sluggish in China, this situation “will continue to be a drag” on Chinese exports for the rest of this year, as European households will consume less, notes Mr. Biswas.

Logically, the country’s imports also fell in August (+0.3% year on year), after rising 2.3% a month earlier.

Analysts had anticipated a slowdown but much less pronounced (1.1%).

As for China’s trade surplus, it fell sharply in August: 79.39 billion dollars (80.3 billion euros).

This level is well below July’s record high ($101.2 billion).

Despite a much lower number of contaminations than the rest of the world, China continues to apply a strict health policy, a source of uncertainty.

These measures translate into multiple confinements as soon as positive cases appear, through almost compulsory PCR tests sometimes every 24 hours, which penalizes the movement of goods and people.

– “Finding a balance” –

These uncertainties – which are weighing on economic activity and therefore on household income – are dampening consumption. As a result, China’s demand for foreign products is shrinking.

However, “China must rely more on its domestic demand than on exports, because the world economy is likely to slow down”, warns the economist Zhiwei Zhang, of the firm Pinpoint Asset Management.

“The main challenge” now is to “find a balance” between the economy and the management of the epidemic, estimates Mr. Zhang.

Beijing has set itself the goal this year of increasing its gross domestic product “by about 5.5%”.

But many economists doubt that it will be reached because of the health restrictions which are hindering the recovery.

If reached, this figure would mark the weakest rate of growth for China since the beginning of the 1990s, excluding the Covid period.

This slowdown comes in a politically sensitive year which should see, barring a cataclysm, President Xi Jinping being reappointed as head of the Chinese Communist Party (CCP) and therefore of the country in October.

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