Macroscope | Covid-19, Ukraine war and property downturn all add to China’s economic policy challenges

China’s slowing export growth rate has sent shivers through global stock markets, and consumer spending growth decelerated sharply in April

Monetary policy should stay steady to minimise inflation risks and maintain exchange rate stability, while the focus should be on cutting taxes and fiscal spending incentives

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Published: 2:15pm, 23 May 2022

China’s export markets are slowing, which is no surprise considering the heavy headwinds buffeting the global economy. The Ukraine war, inflation pressures and central banks fighting back with higher interest rates are all taking their toll. Global economic confidence looks vulnerable, recession talk is back in vogue and world trade growth is slowing.

So, it’s no surprise to see China’s export growth rate slowing to 3.9 per cent year on year in April, from 32.2 per cent a year ago when the export sector was bouncing back from the depths of 2020’s Covid-19 crisis. It has sent shivers through global stock markets, fearful that this may be the harbinger of tougher times.

If the world’s foremost export economy is feeling the pinch, then the world may be in deeper trouble than previously thought. It means Beijing has to go overboard on policy stimulus to stand a good chance of hitting its 5.5 per cent growth target this year.

But does China need faster export growth when the economic focus should be on reinforcing domestic demand under the ambit of its dual circulation drive – getting the best out of internal growth and reducing exposure to volatile international trading conditions?

Beijing may be scaling back its traditional reliance on export growth, but it should be glad of any extra support to meet its growth objectives in challenging circumstances. The weaker renminbi should help, especially after the sharp 5.5 per cent depreciation against the US dollar over the past two months, but that might be a mixed blessing.

It may be a bonus for hard-pressed exporters, but Beijing should avoid stoking trade tensions with Washington when the stronger dollar may be pricing US exporters out of China’s domestic markets.

.css-1m2rp1p{color:#34b8b5;}Macroscope | Covid-19, Ukraine war and property downturn all add to China’s economic policy challenges

Macroscope | Covid-19, Ukraine war and property downturn all add to China’s economic policy challenges