Another Bad Quarter For China's Economy As Both Exports And Imports Plunge

In July, China experienced a notable downturn in its trade figures, as reported by customs data on Tuesday (8 August). The world's second-largest economy saw a substantial 14.5 per cent drop in exports year-on-year, while imports contracted by 12.4 per cent.

This decline in outbound shipments marked the most significant decrease since February 2020.

Economists surveyed by Reuters had predicted a milder 12.5 per cent decrease in exports and a 5 per cent dip in imports.

During the second quarter, China's economic growth remained sluggish due to weakened demand both domestically and internationally. In response to these challenges, high-ranking officials pledged additional policy support during a Politburo meeting last month.

The state planner also indicated plans for stimulus in the preceding week. However, investors have yet to be impressed by proposals aimed at expanding consumption in sectors like automobiles, real estate, and services.

Chinese policymakers are striving to enhance domestic consumption without overly loosening monetary policy. This caution is driven by concerns of potential significant capital outflows, especially as other major economies are raising interest rates to curb mounting inflation.

The lackluster performance in exports serves as a recent indicator that third-quarter growth might further decelerate. Several aspects of the economy are weakening, including construction, manufacturing, services activity, foreign direct investment, and industrial profits.

This economic trend is exerting a ripple effect on other parts of Asia as well. South Korea, for instance, saw a steep 25.1 per cent decline in its exports to China in July compared to the previous year—the sharpest drop in three months.

Despite these challenges, China's trade surplus expanded by $80.6 billion, surpassing the $70.6 billion forecasted in the survey.