Saturday, 23 September 2023 08:45 GMT

China's Exports Contract Faster Than Expected, Highlighting Fragile Economic Recovery

(MENAFN) China's exports experienced a more significant contraction than anticipated in May, while imports continued to decline, raising concerns about the global demand outlook, particularly in developed markets. This has cast doubts on the fragile economic recovery both within China and worldwide.

Despite the stronger-than-expected growth in the first quarter of the year, driven by robust services consumption and a backlog of orders following prolonged COVID-related disruptions, China's factory output has started to slow down. Rising interest rates and inflation have led to a squeeze in demand from the United States and Europe, resulting in a challenging environment for Chinese exports.

Data from China's Customs Bureau revealed that exports in May plunged by 7.5 percent year-on-year, a significant decline compared to the anticipated 0.4 percent fall. In fact, it marked the largest drop since January. Meanwhile, imports contracted by 4.5 percent, which was a slower decline than the expected 8.0 percent, as well as a slight improvement from April's 7.9 percent fall.

The pronounced weakness in exports emphasizes the need for China to rely more on domestic demand as the global economy slows down. Zhiwei Zhang, chief economist at Pinpoint Asset Management, highlighted the pressure on the government to boost domestic consumption in the coming months, given the likelihood of further weakening in global demand during the second half of the year.

The data also revealed that the trade situation was even worse than when China's busiest port in Shanghai was shut down due to stringent COVID-related restrictions a year earlier. This underscores the severity of the current economic challenges.

These figures add to a growing list of indicators that suggest China's post-COVID economic recovery is losing momentum rapidly, which further strengthens the case for implementing additional policy stimulus measures.


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