Imports also weaker
Chinese exports are falling surprisingly sharply
April 12, 2024, 12:03 p.m
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The beginning of the year indicates a recovery in imports and exports in China. But the Chinese customs figures for March nip the initial hopes in the bud. Experts attribute the setback in foreign trade to the real estate crisis and weak consumer demand.
A slump in exports and a surprising fall in imports are raising doubts about the economic recovery in China. Exports were 7.5 percent weaker than a year earlier, according to the customs authority in Beijing. This is the sharpest decline since August 2023. Economists had only expected a decline of 2.3 percent after exports had risen by 7.1 percent in the January/February period. Imports also fell unexpectedly, by 1.9 percent.
This indicates weak domestic demand. Economists had expected growth of 1.4 percent here, after imports had increased by 3.5 percent in the first two months combined. “It will be a long road before China’s foreign trade gives the country a boost to growth again,” said Jones Lang Lasalle chief economist Bruce Pang. Weak foreign trade signals an economic slowdown.
The economists surveyed predicted that the gross domestic product of the world’s second largest economy after the USA was only likely to have grown by 4.6 percent in the first quarter compared to the same period last year. That would be the slowest growth in a year.
China’s economy is struggling with an ongoing housing crisis and weak consumer demand. In March, Prime Minister Li Qiang set an ambitious growth target of around five percent for 2024, which will be driven in part by greater investment in new high-tech sectors. China is currently dumping electric cars, batteries, solar panels, semiconductors and other industrial goods onto the global market in large quantities. The prices for many goods are falling on global markets as a result of this export offensive, which is putting pressure on producers in other countries such as the USA and Germany.
The Kiel Institute for the World Economy (IfW) advises the European Union to negotiate with China as part of the recently initiated anti-subsidy proceedings against imports of electric cars. The aim must be to abolish subsidies that are particularly harmful to the EU. Given China’s current economic weakness, its relative strength in green technology sectors and tensions with the USA, the IfW sees a realistic chance that such negotiations can be successful. Chancellor Olaf Scholz’s upcoming trip to China “offers an excellent opportunity to prepare the ground for such negotiations.”