Coronavirus: China export slump ‘on par with global financial crisis’ as surprise trade deficit concerns Beijing

China’s trade deficit in the first two months was US$7.1 billion, the first since March 2018, which could hit recovery hopes from coronavirus shutdown

Analysts suggest that while January-February data were bad, the worst will come later, as other countries’ demand for Chinese exports sags

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Aerial photo taken on March 5, 2020 shows containers at a logistic station of Shenyang East Railway Station in Shenyang, northeast China's Liaoning Province. Photo: Xinhua

Published: 8:15pm, 9 Mar 2020Updated: 10:37pm, 9 Mar 2020

China’s surprise drop into trade deficit over the first two months of the year will raise concerns in Beijing that “the worst is yet to come” for the economy, as the country tries to recover from the shutdown caused by the coronavirus.

On Saturday, China’s customs body reported a rare trade deficit of US$7.1 billion – the first since March 2018, when it was US$5.5 billion – although that was for a single month. Meanwhile “the decline in exports, if seasonally adjusted, is on a par with the 2008 global financial crisis”, said Julian Evans-Pritchard, senior China economist at Capital Economics.

The bigger than expected fall in exports – minus 17.2 per cent for January-February – came even before foreign markets became mired in the supply chain fallout of the virus, with its now-rapid spread around the world set to hit demand for Chinese goods for months to come.

“Any recovery will be significantly dampened by the spread of the coronavirus outside China, which looks set to weigh heavily on foreign demand,” Evans-Pritchard wrote in a research note.

With industrial production likely to struggle for the next few months as factories try to get up to pace, and the service sector possibly weak for even longer, a strong trade performance would have helped Beijing weather the sharp negative effects of the coronavirus epidemic on an already slowing economy.

But that may no longer be realistic. A drop in the trade surplus suggests trade will provide less support for economic growth and that the impact could be larger than thought.

“The worst is yet to come for exports and supply chains,” warned Larry Hu, chief China economist at Macquarie Capital, with China’s famed export engine – accounting for nearly 15 per cent of global exports – grinding to a halt for weeks over the Lunar New Year holiday.