China’s Export Boom Is Slowing, Putting More Pressure on the Government to Provide Stimulus

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HONG KONG, China— As the pandemic-driven worldwide surge in demand for China’s commodities fades, the country’s strong export momentum has slowed significantly in the first two months of this year, putting pressure on policymakers to boost GDP with additional stimulus.

According to figures from the General Administration of Customs, exports increased 16.3 percent in dollar terms from a year ago to $544.7 billion in January and February. While it exceeded economists polled by The Wall Street Journal’s projections of a 15% growth, it was nevertheless a drop from the 20.9 percent year-over-year increase in December.

Imports increased 15.5 percent year over year to $428.7 billion, down from 19.5 percent in December and line with economists’ predictions of 15.4 percent growth.

While China bought less energy, such as coal, natural gas, and crude oil, prices have risen and may continue to rise as Russia’s invasion of Ukraine threatens to disrupt supplies.

Economists anticipate that China’s trade surplus, which hit $676 billion last year and has fueled the country’s quick recovery from the epidemic since 2020, will provide less help to the country’s overall economy this year.

stimulus check & China's Export Boom Is Slowing
China’s Export Boom Is Slowing, Putting More Pressure on the Government to Provide Stimulus

“It’s practically difficult for China to maintain such high export momentum this year,” said Shuang Ding, Standard Chartered Bank’s senior economist for China and North Asia.

According to Mr. Ding, the country’s trade surplus would likely drop to roughly $480 billion this year as export growth slows and commodity prices such as grains and petroleum rise.

The progressive reopening of other nations, lessening their reliance on China’s supply chains, and a projected immediate rate increase by the US Federal Reserve are all factors that economists believe will slow export growth. This would reduce the purchasing power of Western customers, whose hunger for furniture and consumer gadgets has propelled Asia’s strong exports since the outbreak began.

Global trade growth is anticipated to decrease in the first quarter of 2022, according to predictions from the United Nations Conference on Trade and Development, after increasing by 25% last year to a record $28.5 trillion. This is due in part to more governments winding down their economic stimulus packages.

The conflict in Ukraine has the potential to worsen supply-chain bottlenecks and stymie global recovery. It might have a particularly negative impact on the European Union’s economies, which are China’s second-largest trading partners. Standard Chartered has lowered its 2022 economic growth prediction for the region from 4% to 3.1 percent.

stimulus check & China's Export Boom Is Slowing (1)
China’s Export Boom Is Slowing, Putting More Pressure on the Government to Provide Stimulus

According to Larry Hu, chief China economist at Macquarie Group, any slowdown in the EU would dampen demand for global goods and hurt China’s export market outlook. He expects year-over-year growth in exports to slow significantly from last year’s 30 percent to a “high single-digit” rate this year.

China’s trade momentum is deteriorating, putting further pressure on the government to provide stimulus to bolster domestic demand and meet this year’s GDP objective.

The government set a 5.5 percent growth target for this year on Saturday, an ambitious aim that prepares the way for more robust fiscal and monetary support as the country grapples with domestic headwinds such as a property downturn and a sluggish rebound in spending.

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“With the Ukraine situation putting global demand at danger, China will have to rely more on local demand in 2022,” wrote Zhiwei Zhang, chief economist at Pinpoint Asset Management, in a note Monday. “The fiscal policy is now under pressure to deliver.”

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