The Background
Economists had expected the August trade numbers to be slightly worse. A Reuters survey forecast that exports had fallen 9.2 percent in August from a year earlier, and that imports had dropped 9 percent. Exports had plunged 14.5 percent from a year earlier in July.
Many multinationals, especially large retailers in the United States, have become worried about the dependence of their supply chains on China as geopolitical tensions have increased in recent years and as international trade disputes have intensified, particularly between the United States and China.
China’s drastic “zero Covid” measures during the pandemic, particularly the weekslong lockdowns of Shanghai, Shenzhen, Guangzhou and other big industrial centers and ports, led to many shipping delays as well as the departure from China of many expatriate managers for multinationals.
With pandemic concerns now fading, households around the world, including in China, have shifted their spending patterns toward travel, restaurant meals and other services. Many had stocked up on manufactured goods during the pandemic, often from China, which has by far the world’s largest factory sector.
Why It Matters
Export and import statistics provide one of the early indications each month of how the Chinese economy fared in the preceding month. China relies heavily on running very large trade surpluses every month as a way to create tens of millions of jobs, and that has become particularly important this year as youth unemployment has surged.
Exports have become even more important in the past couple years as China confronts a sharp slowdown in the housing market, following years of rampant speculation that drove apartment prices up tenfold or more in many Chinese cities.
The data released on Thursday was the latest sign that overall demand for China’s goods may have begun to bottom out. “Less bad exports and imports add to our conviction that July was likely the darkest hour for economic activity in China,” said Louise Loo, an economist in the Singapore office of Oxford Economics, a consulting firm.
While China’s exports have been weak this year, they are coming down from a very high level achieved during the pandemic. The country remains an industrial powerhouse.
“Export orders aren’t looking good to the U.S. or Europe, but in terms of Asia and elsewhere they are ramping up solidly,” said a recent research note issued by China Beige Book, an economic research group.