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
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.
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,” said Julian Evans-Pritchard, senior China Economist at Capital Economics.
The PMI, a survey of sentiment among factory owners – was 52.0 in March, up from 35.7 in February. A reading above 50 shows growth in the sector, while the further below 50, the deeper the contraction.
“Sliding global demand amid lockdowns and social distancing measures implemented in China’s trading partners means that China’s exports will fall more substantially in upcoming months,” said Louis Kuijs, head of Asia economics at Oxford Economics.
“Looking ahead, we expect imports to be under pressure as consumers remain reluctant, while demand for inputs used in exports will falter.”
Overall in the first quarter of 2020, China’s exports dropped 13.3 per cent, with imports were down 2.9 per cent.
“Since the Covid-19 outbreak didn’t escalate in Europe and North America until late February, its impact on China’s exports to those major destinations will become more apparent in the second quarter, especially April and May.
“We expect China’s export growth to plummet to around minus 30 per cent year-on-year in the second quarter.”
Global trade is expected to contract by up to 32 per cent in 2020 due the damage being done to the economy by the coronavirus pandemic, the World Trade Organisation said last week.
In the first quarter, China’s exports to the US dropped 25.2 per cent, with imports down 3.7 per cent.
“With the gradual implementation of the phase one trade deal, some positive elements have emerged in bilateral trade between China and the US. In particular, the imports of some products from the US have shown a good increasing trend recently,” said Chinese customs spokesman Li Kuiwen.
“The contraction of demand in the international market will inevitably have an impact on Chinese imports and exports, and with the problem of decreasing new orders emerged gradually, the difficulties that China's foreign trade is facing cannot be underestimated.”
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