China exports stun with surprise surge in March but economists warn of weakness ahead

BEIJING – China’s exports unexpectedly surged in March, with officials flagging rising demand for electric vehicles, but analysts cautioned that the improvement partly reflected suppliers catching up with unfulfilled orders after 2022’s Covid-19 disruptions.

Exports in March shot up 14.8 per cent from a year ago, snapping five straight months of decline and stunning economists who had predicted a 7 per cent fall in a Reuters poll.

But analysts said the jump was more likely related to exporters rushing to fulfil a backlog of orders that had been disrupted by the pandemic in past months, and warned that the global demand outlook remained subdued.

“The wave of Covid-19 outbreaks in December and January likely depleted factories’ inventories. Now that factories are running at full capacity, they caught up with the cumulated orders from the past,” said Pinpoint Asset Management chief economist Zhang Zhiwei.

“The strong export growth is unlikely to be sustained given the weak global macro outlook,” he added.

Meanwhile, imports fell less than expected, with economists pointing to an acceleration in the purchase of agricultural products, especially soya beans, as proving some support.

Imports dropped just 1.4 per cent, smaller than the 5 per cent decline forecast and a 10.2 per cent contraction in the previous two months.

Mr Lyu Daliang, spokesman for the General Administration of Customs, attributed the upside surprise to strength in demand for electric vehicles, solar products and lithium batteries.

But he warned that conditions could worsen in the future.

“The external environment is still severe and complicated at present,” Mr Lyu told reporters in Beijing on Thursday.

“Sluggish external demand and geopolitical factors will bring greater challenges to China’s trade development,” he added.

China’s strong performance contrasts with that of other Asian exporters such as South Korea and Vietnam, which have both seen exports decline in the first few months of 2023, contributing to doubts that it can be sustained.

“We are not convinced that this rebound will be sustained given the still gloomy outlook for foreign demand,” Capital Economics analysts said in a note.

“We expect most developed economies to slip into recession this year and think that the downturn in Chinese exports still has some way to run before it reaches a bottom later this year.”

Newly appointed Premier Li Qiang told a Cabinet meeting last week that officials should “try every method” to grow trade with developed economies and push companies to further explore emerging market economies, such as those of South-east Asia.

China has set a gross domestic product growth target of around 5 per cent for 2023, after severe pandemic controls in 2022 knocked the economy to one of its slowest rates in decades. GDP rose only 3 per cent in 2022. REUTERS