China’s trade data better than expected, but worst is not over

Analysts warned that the global spread of the coronavirus would hurt China's economic growth in the months to come.

Analysts warned that the global spread of the coronavirus would hurt China’s economic growth in the months to come.

China’s exports and imports slowed their declines in March after plunging in the previous two months, but a sure-footed recovery in trade remained months away as the coronavirus outbreak shuts down many economies and sharply lowers global demand.

Customs data on Tuesday showed China’s overseas shipments fell 6.6 percent in March year-on-year, improving from a 17.2 percent slide in January-February, as exporters rushed to clear a backlog of orders after forced government production shutdowns.

Analysts had forecast shipments to drop 14 percent from a year earlier.

Yet, while the trade figures were not as bad as feared, analysts say the export and overall growth outlook for the world’s second-biggest economy remains grim as the pandemic has brought business activity across the globe to a standstill.

“The above-expectation March trade figures do not mean that the future is carefree,” said Zhang Yi, Beijing-based chief economist at Zhonghai Shengrong Capital Management.

“A decline in exports throughout the second quarter has been the market consensus now and a drop of 20 percent or more is a high-probability event. For policymakers, more policies should be rolled out to address the possible societal issues stemming from mass-scale unemployment,” Zhang said.

The data showed imports slid 0.9 percent from a year earlier, also above market expectations of a 9.5 percent drop, which the customs attributed to improving domestic demand. They had fallen 4 percent in the first two months of the year.

Stock markets in Asia extended their gains after China’s trade report, while risk-sensitive currencies including the Australian and New Zealand dollars as well as the pound pulled ahead, mainly due to relief following the less gloomy data. China’s yuan edged higher.

Most analysts expect China’s first-quarter gross domestic product data, set for release on Friday, will show a contraction – the first quarterly slump since at least 1992.

The pandemic’s sweeping toll on businesses and consumers has triggered an unprecedented burst of stimulus from policymakers around the world in the past two months.

Customs spokesman Li Kuiwen told a news conference that China’s trade showed some signs of recovery in March as domestic demand returns to normal, but he emphasised that difficulties facing foreign trade cannot be underestimated.

The World Trade Organization last week forecast that the trade in goods would shrink more steeply this year than in the global financial crisis 10 years ago before rebounding in 2021 as the coronavirus pandemic recedes.

Beijing is trying to restart its engines after weeks of near paralysis to contain the pandemic that had severely restricted business activity, the flow of goods and the daily life of people.

But analysts warn it could take months before the economy returns to normal as the virus has spread rapidly around the world, virtually shutting down many countries and raising the risk of a steep global recession this year.

Julian Evans-Pritchard, senior China economist at Capital Economics, in a note to clients seen by Al Jazeera, wrote: “Although supply-side disruptions to factory activity have now eased, foreign demand will slump this quarter as COVID-19 weighs on economic activity outside of China.”

“Imports should hold up better given that domestic demand looks set to stage a further recovery in the coming months. But since a sizeable portion of imports feed into China’s export sector, inbound shipments will also come under pressure,” he said.


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