Mixed trade figures for China add up to more fiscal stimulus
- Further evidence of a weakening global economy is to be found in the imports and exports for April, and the need to support the manufacturing labour market
China’s mixed trade figures for April are not entirely unexpected as the global economy struggles to regain traction amid the disruption of the pandemic and the Ukraine war. But it also reflects other factors that will continue to weigh on the mainland’s role in the global supply chain and probably show up in monthly trade results.
Exports rose 8.5 per cent last month year on year to US$295.42 billion, compared with a 14.8 per cent rise in March, according to Chinese customs data. Imports fell 7.9 per cent in April to US$205.21 billion, after falling 1.4 per cent in March.
Further evidence of a weakening global economy is to be found in the figures for other major exporters such as South Korea and Vietnam. The weak data is consistent with April’s official purchasing managers’ index, which fell below 50 – the line between expansion and contraction.
The import figure is a worry, and not just because it failed expectations. Since China sits in the middle of global supply chains, it imports components for its assembly lines and exports the final products. The sharp decline in imports therefore means that going forward, exports too will probably be affected.
Chinese factories tend to order fewer imports when they get fewer export orders. But there is a time lag between the two, meaning April’s import slump is likely to be reflected in export figures in a month or two.
This means China cannot rely on exports alone to sustain the momentum of the first-quarter recovery – domestic consumption is important, too. In that respect, China’s latest Consumer Price Index (CPI) and Producer Price Index (PPI) do nothing for confidence in an early reversal of the trend.
The CPI rose by 0.1 per cent in April from a year earlier, down from 0.7 per cent growth in March, dropping to the lowest rate since February 2021. Meanwhile, the PPI, which reflects prices at the factory gate, fell by 3.6 per cent in April, year on year, down from a fall of 2.5 per cent in March.
That is not all that ails the global supply chain. The United States’ attempt to fence off China is another factor, forcing the mainland to rely more on its own technology and reduce reliance on Japan or South Korea for parts.
This is not good for the global economy, already unnerved by the crisis of confidence in US banks and the looming US national debt ceiling, on top of the pandemic slowdown and war in Europe. It is a scenario that evokes the twin spectres of a fragmented global market and disrupted supply chains.
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Economists say falling imports and the expectation of a slide in exports make it more likely the government will step in with a fiscal stimulus to support the manufacturing labour market.
