China trade: exports to ‘contract until middle of the year’, but reopening demand set to lift imports

Amid an abrupt and chaotic reopening, China’s exports in December recorded the biggest year-on-year slump since the Wuhan lockdown in early 2020, with further contraction expected in the coming months, analysts said.

“This can be pinned on weakening global demand for Chinese goods, as well as some disruption to logistics networks and goods supply due to labour shortages amid the reopening wave of infections,” said Zichun Huang and Julian Evans-Pritchard, economists at Capital Economics.

Shipments to the United States and European Union continued to tumble sharply, falling by 19.51 and 17.5 per cent, respectively, compared to a year earlier.

Though supply-side disruptions are diminishing as labour shortages fade amid waning infections, with growth outside China still slowing, exports may continue to “contract until the middle of the year”, Huang and Evans-Pritchard added.

The weak export growth highlights the importance of boosting domestic demand as the key driver for the economy in 2023, said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

“The market anticipates more policies to boost domestic consumption. So far policies in the property sector and internet sector have changed quite aggressively and helped to boost confidence in those sectors,” Zhang said.

“But in the consumer space supportive policies are mostly launched by local governments instead of the central government. This may change in March when the new government takes office.”