China’s exports in 2023 weighed down by ‘very weak’ outlook, analysts say
- The second half of the year could bring a pickup in demand for China, including a recovery in semiconductor output
- But analysts say dwindling global demand amid sustained inflation looks to persist throughout 2023, and trade growth will remain mild
China’s export growth percentage is estimated to remain in the “low single digits” this year, with the possibility of a pickup in the second half, according to an outlook by Goldman Sachs that comes amid supply-chain disruptions and sluggish global demand.
Andrew Tilton, chief Asia economist at the American investment bank, said on Tuesday that the global economy is “still rotating back to services to some extent”, rather than trade.
“That’s a relatively soft outlook from China’s perspective. Right now it’s very weak,” he said at a media briefing in Hong Kong. “In the electronics and tech areas, people bought a lot of that kind of equipment during the pandemic, and so you have a sort of overhang.”
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But Tilton expects there will be a pickup in demand for products, including smartphones, in the second half of the year, and he said this should aid in the recovery of the semiconductor supply chain.
China’s trade figures for January and February will be released next month, with the data combined to smooth out the impact of the Lunar New Year holiday, which falls at different times during the two months in different years.
The Paris-based Allianz Trade said in a report last week that China’s post-Covid reopening will help normalise the disrupted supply chains, but sluggish global demand implies that an oversupply will continue this year.
After a resilient performance in the first half of 2022, global trade deteriorated in the second half of last year and is likely to remain muted in 2023, the report said.
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Dwindling global demand amid sustained inflation is set to persist throughout this year, and trade growth will remain mild, the report added.
“[There has been] an oversupply situation since the fourth quarter of 2022,” said Francoise Huang, senior economist for the Asia-Pacific region at Allianz Trade.
“Ample supply and some stabilisation in supply chains are likely to prevail this year on the back of weakening demand, replenished inventories, increased [capital expenditure] and normalising shipping conditions.”
The international insurance company revised its forecast for global trade growth in 2023 from 0.7 per cent to 0.9 per cent with a “slight quarter-to-quarter contraction between the last quarter of 2022 and the second quarter of 2023”, before “a moderate recovery” in the third quarter, then a “firming up” by the end of the year.
Taiwan export orders fall again, led by 45.9 per cent slump in mainland China
Information from Dimerco Express Group, a Taipei-based third-party logistics provider, showed that the market has been muted in February due to “weak demand”, while most factories only resumed work last week following the Lunar New Year holiday.
“The market needs more time to recover,” said Catherine Chien, head of digital marketing at Dimerco.
Shipping rates have dropped a lot for sea transport compared with the same period last year, she added. The rate has also returned to the normal level for cross-border trucks between Hong Kong and mainland China, after the route reopened on February 6.
Amid slowing global trade, importers and exporters are finding ways to ensure smooth supply flows while examining the possibility of diversification after being hit by disruptions brought on by the Ukraine war and nearly three years of coronavirus-induced lockdowns in China.
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Matthew Fass, president at US-based Maritime Products International in Virginia, said that “it is always sensible for supply chains to be thinking about healthy diversification”, and that lesson was reinforced amid the pandemic.
“I believe companies are all evaluating things based on their own situations, and it would be wrong to try to paint an answer with too broad a brush,” he added.
Some are likely to keep certain supply chains in China, but they will do everything possible to establish strong complimentary chains in other countries, including back to the United States, he said.
Others may take a more cautious approach with marginal movements to other places while hoping China to remain a leading partner, he added.
