China registered the biggest drop in exports since the pandemic and its recovery is getting colder

Port of Shanghai (Reuters) (STRINGER /)

China suffered last month its biggest drop in exports in more than three yearsaccording to official data showed on Tuesday, at a time when the world’s second largest economy is being hit by sluggish global demand and the internal slowdown.

The data is likely to intensify calls for leaders to do more to revive growth, after unveiling a series of stimulus measures focused on consumers and the troubled real estate sector in recent weeks.

Sales of Chinese goods to foreign markets fell 14.5% year-on-year last monththe third consecutive drop, according to the customs authority.

He drop was higher than expected and the strongest since the 17.2% drop recorded in January-February 2020, when the economy came to a standstill in the first weeks of the Covid-19 virus pandemic.

Apart from a brief uptick in March and April, exports have been in steady decline since October.

The threat of recession in the United States and Europe, coupled with high inflation, has contributed to weaken international demand for Chinese products in the last few months.

Containers in Yangshan (Bloomberg)
Containers in Yangshan (Bloomberg) (Qilai Shen/)

Shipments to the European Union in the first seven months of the year amounted to 2.08 trillion yuan (288.9 billion dollars), 2.6% less, the customs authority said in a separate statement on Tuesday.

For his part, imports fell by 12.4%a ninth consecutive month of contraction and further proof that domestic demand has plummeted.

“Chinese trade figures for July they disappointed againKen Cheung Kin Tai, an analyst at Mizuho Bank, wrote in a note. “Weak trade figures highlighted sluggish external demand as (importers) refrained from purchasing goods for domestic production and investment,” Cheung said.

“In this context, the depreciation of the renminbi (yuan) could serve as a tool to support Chinese exports and facilitate economic recovery,” he added.

The images of empty businesses continued after the pandemic (REUTERS/Thomas Peter/File)
The images of empty businesses continued after the pandemic (REUTERS/Thomas Peter/File) (THOMAS PETER/)

internal slowdown

Trade figures are the latest indication that China’s post-COVID recovery has run out of steamhaving enjoyed a brief rebound following the removal of zero coupon measures late last year.

The economy grew just 0.8% qoq in April-June, while youth unemployment has reached all-time highs of more than 20%.

The official manufacturing purchasing managers’ index for July, a key measure of industrial production, stood at 49.3 points, below the 50-point mark that separates expansion from contraction.

And the real estate sector remains mired in crisiswith large developers failing to complete their housing projects, triggering protests and mortgage boycotts by buyers.

A thwarted Evergrande real estate development, a symbol of China's real estate crisis (REUTERS/Aly Song/File)
A frustrated real estate development of Evergrande, a symbol of China’s real estate crisis (REUTERS / Aly Song / File) (ALY SONG /)

The authorities have come under increasing pressure to introduce further stimulus after months of debilitating data.

The top leaders, known as the Politburo, have pledged to provide much-needed support to the economy, but have warned that it faces “new difficulties and challenges”, as well as “hidden dangers in key areas”.

China’s State Council last month released a 20-point plan to increase consumption across the board, including housing, culture and tourism, as well as green consumption such as electric vehicles.

The central bank has also cut several interest rates in recent weeks in an effort to revive the economy.

However, the analysts have warned that the huge debt of local governments and the determination of officials to put the country on a more sustainable growth trajectory, and away from state investment, make the sweeping bazooka measures of the past unlikely.

Beijing is aiming for growth of around 5% this year, one of the lowest targets set by the Asian giant in decades, and one that Prime Minister Li Qiang has warned will not be easy to achieve.

(With information from AFP)

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