China’s exports unexpectedly slow in warning sign for economy

BEIJING – China’s exports grew at their slowest pace in three months in July, missing expectations and adding to concerns about the outlook for the nation’s vast manufacturing sector, even as imports swung back to resume solid growth.

Outbound shipments climbed 7 per cent in July from the year earlier, a slower pace of growth than June’s 8.6 per cent rise and missing forecasts of a 9.7 per cent increase.

“Due to base effect, China’s exports may keep a single-digit growth in the near future, but considering the slowing external demand and tariffs, the outbound shipments in the second half of 2024 will face bigger pressure,” said Mr Lynn Song, chief economist for Greater China at ING.

Imports rose at a robust 7.2 per cent rate, reversing a 2.3 per cent decline in June and marking the strongest performance in three months. It also beat analysts’ expectations of a 3.5 per cent rise.

The brighter import figures were underpinned by Chinese firms’ rush to buy chips ahead of expectations of further US curbs on chip exports to the Asian giant, said Mr Xing Zhaopeng, senior China strategist at ANZ.

“Looking ahead, the upward trade cycle may have ended. Both imports and exports are expected to slow down in the third quarter.”

The world’s second-largest economy has struggled to gain momentum despite government efforts to stimulate domestic demand following the Covid-19 pandemic. A protracted property slump and fears about job security have dragged heavily on consumer confidence.

China’s trade surplus narrowed to US$84.65 billion (S$112.5 billion) in July, compared with the US$99 billion forecast and US$99.05 billion recorded in June. The US has repeatedly highlighted the surplus as evidence of trade advantages enjoyed by Chinese firms.

China’s economy grew 4.7 per cent in the second quarter, below expectations, keeping alive calls for policymakers to roll out more support to hit the government’s full-year growth target of around 5 per cent.

Chinese leaders pledged last week that the stimulus measures will be directed at consumers and the country will make “counter-cyclical adjustments” during the rest of 2024.

The slowdown in export growth adds to concerns about the outlook for the sector, analysts say, with many countries growing increasingly uneasy about China’s trade dominance.

The US, Europe and emerging economies from Turkey to Indonesia have raised tariffs and placed other barriers on Chinese products. Washington announced in May plans to raise tariffs on an array of Chinese products on Aug 1 but decided it would delay some of them.

Chinese tech giants, including Huawei and Baidu as well as start-ups, have ramped up purchases of high-bandwidth memory semiconductors to stockpile in anticipation of US curbs on exports of the chips to China, Reuters reported on Aug 6. REUTERS, BLOOMBERG