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Construction vehicles are waiting to be shipped overseas at the Chinese port of Lianyungang
Photo: IMAGO/Wang Chun / CFOTO / IMAGO/NurPhoto
Weak global demand has caused China's exports to plummet unexpectedly. Exports fell by 7.5 percent in US dollars in May compared to the same period last year, reports the customs administration in Beijing. The decline was particularly sharp compared to the previous month, when an increase of 8.5 percent had been recorded. The surprisingly significant slowdown in foreign trade is raising new fears that the economic recovery of the world's second-largest economic power could fizzle out.
Only Chinese exports to Russia, which is subject to international economic sanctions because of its war against Ukraine, have risen sharply. Exports to the neighboring country more than doubled by 114.3 percent in May. Imports from Russia increased by 10.1 percent. Since the invasion, China has unwaveringly backed Russian President Vladimir Putin and has not condemned his attack to this day.
Imports are also weakening
As a sign of a continued weak domestic market in China, imports also fell in May for the second month in a row. Although the 4.5 percent decline in imports was smaller than experts had expected, it is striking because the basis for comparison was low a year ago. At that time, the Corona lockdown in Shanghai had largely brought China's largest port to a standstill.
The weakness of China's export machinery is obscuring the prospects for growth in the Chinese economy, which had initially started the year comparatively well after the end of the strict zero-Covid policy in December. The government in Beijing is planning "around five percent" growth for the entire year. In the first quarter, an increase of 4.5 percent was achieved.
"The current trade figures speak for themselves: the Chinese economy continues to be on shaky ground," said Jens Hildebrandt, Managing Director of the German Chamber of Commerce (AHK) in Beijing. "The business expectations of local companies are also increasingly cautious," he reported. "In view of this development, a medium-term recovery is even less predictable than before."
Signs of weakness
Already in April, when imports had fallen by 7.9 percent, concerns about the domestic market were growing. In May, important leading economic indicators were also worse than expected. The official purchasing managers' index (PMI) in manufacturing declined for the second month in a row, falling from 49.2 to 48.8 points. A reading below the 50-point mark indicates a contraction of industrial activity.
The main reasons for the sharp downturn in Chinese exports are the weak momentum on the world markets. High inflation, increased interest rates and inflated energy prices due to the Ukraine war are also weighing on demand for products "Made in China". Foreign trade has fallen by 2.8 percent since the beginning of the year – most recently by as much as 6.2 percent in May, according to customs.
Setbacks for German companies
German exporters also suffered a decline in their business in China. Chinese imports from Germany fell by 3.8 percent. China's exports to Germany fell by as much as 8.3 percent. Similarly, trade with the European Union: China's exports to the EU fell by 7 percent, while imports fell by only 0.9 percent. The slump in China's trade with the US was even greater. Exports to the world's largest economy slumped by 18.2 percent, while imports from the U.S. fell by 9.9 percent.
The trade numbers are "another disappointing data that will raise concerns about growth and reinforce expectations for more policy support," Khoon Goh of the Australia and New Zealand Banking Group told Bloomberg. Some observers predict that the central bank may be able to reduce banks' reserve ratios to support the economy. Others also argue that interest rate cuts may even be necessary soon.
beb/dpa