News ID: 324022
Published: 0159 GMT September 07, 2022

China's trade falters as demand wanes at home and abroad

China's trade falters as demand wanes at home and abroad
An aerial view shows containers and cargo vessels at the Qingdao port in Shandong Province, China.

CHINA DAILY VIA REUTERS

China's exports and imports lost momentum in August with growth significantly missing forecasts as surging inflation crippled overseas demand and fresh COVID curbs and heatwaves disrupted output, reviving downside risks for the shaky economy.

Exports rose 7.1% in August from a year earlier, slowing from an 18.0% gain in July and marking the first slowdown since April, official data showed on Wednesday, well below analysts' expectations for a 12.8% increase, Reuters reported.

Outbound shipments have outperformed other economic drivers this year but now face growing challenges as rising interest rates, inflation and geopolitical tensions pummel external demand.

The disappointing August trade figures rattled global financial markets, which have already been buckling under a surging dollar and the prospect of much higher U.S. interest rates.

Responding to the disappointing data, China's yuan extended losses, losing 0.36% to 6.98 per dollar and approaching the psychologically crucial 7 mark.

Despite languishing around two-year lows, the weakening yuan has failed to give China's exports the competitive edge they need to make up for softening external demand.

The slower growth is also in part due to unflattering comparisons with strong exports last year, but also worsened by more COVID restrictions as infections spiked and heatwaves disrupted factory output in southwestern areas.

Export hub Yiwu imposed a three-day lockdown in early August to contain a COVID outbreak, disrupting local shipments and delivery of Christmas goods amid the peak season.

Bucking the broader trend, auto exports remained robust in August, jumping 47% from a year earlier, according to Reuters calculations based on customs data.

In the first eight months, China exported 1.9 million units of cars, up 44.5%, supported by strong demand for new energy vehicles in Southeast Asia.

Weak domestic demand, weighed by the worst heatwaves in decades, a property crisis and sluggish consumption, crippled imports.

Inbound shipments rose just 0.3% in August from 2.3% in the month prior, well below a forecast 1.1% increase. Both imports and exports grew at their slowest pace in four months.

China's imports of crude oil, iron ore and soybeans all fell, as the strict COVID curbs and extreme heat disrupted domestic output.

Baking temperatures, however, led to the fastest increase in coal imports this year as power generators scrambled for additional fuel to meet surging electricity demand.

Chinese policymakers this week signalled a renewed sense of urgency to shore up the flagging economy, saying action was critical in the quarter as data points to a further loss of economic momentum.

The central bank on Monday said it would cut the amount of foreign exchange reserves financial institutions must hold, a move aimed at slowing the yuan's recent declines.

 

 

 

   
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