Reuters, Beijing, June 7 - A gloomy outlook for global demand, particularly from rich nations, caused China's exports to fall considerably faster than expected in May while imports also fell, raising concerns about the economy's shaky recovery.
A backlog of orders following years of COVID interruptions helped the world's second-largest economy grow faster than anticipated in the first quarter, but factory output has slowed as increasing interest rates and inflation restrict demand in the United States and Europe.
According to Indian Export Data released recently by China's Customs Bureau, exports fell 7.5% year over year in May, a significant decrease that was bigger than the 0.4% reduction predicted and the greatest drop since January. Imports decreased by 4.5%, less than the predicted 8.0% loss and the 7.9% decline in April.
China's exports decline in May as demand declines globally
Zhiwei Zhang, chief economist at Pinpoint Asset Management, stated that the disappointing export figures "confirm that China needs to rely on domestic demand as the global economy slows." The government is under additional pressure to increase domestic consumption for the remainder of the year because the second half of the year is expected to see a further decline in global demand.
The data illustrates the degree of the decline by showing that trade was even lower than when Shanghai, China's main port, was shut down due to tight COVID controls a year earlier.
Following the release of the data, Asian markets, the yuan, and the Australian dollar all saw losses. The yuan is a commodity currency that is extremely susceptible to changes in Chinese demand.
As small-time investors become pessimistic about equities and increase their bets on safer assets amid a faltering economic recovery, China's post-pandemic market surge has faded. Faltering demand at home and abroad has had a double-whammy effect on the economy, having repercussions seen throughout the region.
According to Export import data India released by South Korea last week, shipments to China fell 20.8% in May, marking a full year of monthly reductions. Korean semiconductor exports also fell 36.2%, indicating a lacklustre market for final manufacturing components.
As the market for the exports of consumer electronics products that use these components weakened, China's imports of semiconductors decreased by 15.3%.
With imports of coal declining from the 15-month high reached in March and lacklustre demand from the steel and power sectors, demand for raw materials generally decreased. From a year earlier, copper imports decreased 4.6% in May according to Indian export and import data.
Factory activity decreased more quickly than anticipated in May, according to China's official purchasing managers' Index (PMI), which was issued last week.
The subindices of the PMI also revealed that manufacturing output changed from expansion to contraction while new orders, including new exports, decreased for a second month.
Analysts are now revising their projections for the remainder of the year downward as manufacturing output slows, despite the fact that economic growth outperformed expectations in the first quarter.
After miserably failing to achieve its 2022 aim, the administration has set a moderate GDP growth target of roughly 5% for this year.
Julian Evans-Pritchard, head of China economics at Capital Economics, predicted that exports will decline further before bottoming out later this year. The lagged effect from the abrupt rate hikes is expected to reduce activity in developed economies later this year, leading to minor recessions in the majority of situations, even though interest rates outside of China are close to their peak.
Conclusion
However, it's important to note that China is one of the world's largest exporters and has a significant impact on the global economy. Fluctuations in China's export levels can be influenced by various factors, including global economic conditions, trade policies, currency exchange rates, and shifts in consumer demand.
If China's exports were to decline due to a decrease in global demand, it could be indicative of a slowdown in economic activity or changing consumer preferences in importing countries. Such trends can have implications for China's domestic economy and its trading partners. Also, if you need any type of guidance related to Indian export and import data or Indian Export Data, connect with Seair Exim Solutions to expand your trade business in the global market. Schedule a free live demo today!
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