Coronavirus: China’s trade recovery to be short-lived with overseas demand set to fall amid Covid-19

China’s exports only fell 6.6 per cent in March after having contracted 17.2 per cent in combined figures for January and February

But with global demand set to drop amid antivirus measures in US and Europe, analysts have warned of a substantial fall in the coming months

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Overall in the first quarter of 2020, China’s exports dropped 13.3 per cent, with imports were down 2.9 per cent. Photo: AP

Published: 6:30pm, 14 Apr 2020Updated: 6:30pm, 14 Apr 2020

China’s mild trade recovery in March should be taken with a pinch of salt, with overseas demand for its products set to fall further in the coming months under pressure from the coronavirus outbreak.

Exports from the world’s second largest economy still fell by 6.6 per cent in US dollar terms in March compared to a year earlier, but having suffered a 17.2 per cent contraction in combined figures for January and February, this could on the surface be seen as a rare piece of positive economic news. It also beat the 13.9 per cent decline predicted in the median forecast of analysts surveyed by Bloomberg.

Data released on Tuesday by the General Administration of Customs also showed imports only dropped 0.9 per cent from a year earlier, compared to a 4 per cent decline in January and February. Analysts surveyed by Bloomberg had predicted imports to drop 9.5 per cent.

But while China reported just three domestic cases and zero coronavirus deaths on Tuesday, its main trading partners – particularly the United States and Europe – are still getting to grips with the pandemic, which is expected to lead to a drop in overseas orders in the period ahead.

Shipments picked up last month as factories reopened and domestic demand began to recover. But with economic activity in the rest of the world now collapsing, the worst is still to come for China’s export sector

Julian Evans-Pritchard

“Shipments picked up last month as factories reopened and domestic demand began to recover. But with economic activity in the rest of the world now collapsing, the worst is still to come for China’s export sector,” said Julian Evans-Pritchard, senior China Economist at Capital Economics.

“Foreign demand will slump this quarter as Covid-19 weighs on economic activity outside of China. Imports should hold up better given that domestic demand looks set to stage a further recovery in the coming months. But since a sizeable portion of imports feed into China’s export sector, inbound shipments will also come under pressure.”

Figures showed that China’s manufacturing engine bounced back strongly in March from an all-time low in February, but crucially the new export orders element of the official manufacturing purchasing managers’ index (PMI) remained negative.