They added that strong shipments of green technology, including Chinese-made electric vehicles, batteries and solar panels, were helping to offset declines in other areas.

“The recent declines mostly reflect lower prices rather than volumes, which are still well above their pre-pandemic trend,” said analysts at Capital Economics.

“We aren’t convinced that this strength will be sustained, given wider evidence that global-goods demand is dropping back as pandemic distortions unwind and monetary tightening weighs on consumer spending.”

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Base effects skewed annual comparisons to the downside, as manufacturers emerged from the Shanghai lockdowns in June and July last year, said Louise Loo, the lead economist at Oxford Economics.

The fall in exports was again broad-based across all major trading partners, according to analysts at Nomura.

Shipments to the Association of Southeast Asian Nations, which is China’s largest trade partner and one that provided major support to its export sector earlier this year, fell by 21.43 per cent in July compared with a year earlier, marking the second consecutive monthly decline.

Exports to the European Union, meanwhile, declined by 20.62 per cent, year on year, while shipments to the United States dropped for the 12th consecutive month by falling 23.12 per cent in July.

Export growth to the US suffered heavily again, said Nomura’s analysts.

As a result, China’s trade surplus with the US widened to US$30.3 billion in July from US$28.7 billion in June.

2. Imports fall amid soft domestic demand

Imports fell by 12.4 per cent in July from a year earlier to US$201.16 billion, down from a fall of 6.8 per cent in June.

This was also below expectations by Wind for a fall of 11.4 per cent, with analysts at Nomura saying “import growth came in well below expectations amid weak domestic demand”, despite higher commodity and raw-material prices.

“Domestic demand has also softened recently, with import volumes falling in July to their lowest since the start of the year. But policy support should help reverse some of this weakness in the coming months,” added Capital Economics.

The analysts at Capital Economics said that, after accounting for seasonality and changes in import prices, import volumes declined by 5.3 per cent, month on month.

“[This reversed] most of the gains made earlier in the year. It suggests that the downturn in domestic demand continued to gather pace in July,” they added.

Import growth from the US plunged to minus 11.4 per cent from minus 4.2 per cent, which may reflect the highly restrictive US embargoes on semiconductor exports, which continued to hamper China’s imports of goods from the US, added analysts at Nomura.

3. Trade balance the only positive

China’s total trade surplus rose to a three-month high of US$80.6 billion in July compared with US$70.62 billion in June.

“The trade balance was the only positive ... rising to US$80 billion in July from US$71 billion in June, mainly because imports deteriorated more sharply than exports,” Nomura’s team said.

4. Exports to contract through 2023

Analysts at Capital Economics expect exports to decline further over the coming months before bottoming out toward the end of the year.

“Most measures of export orders point to a much greater decline in foreign demand than has so far been reflected in the customs data,” they added.

“And the near-term outlook for consumer spending in developed economies remains challenging, with many still at risk of recessions later this year, albeit mild ones.”

Imports, according to Capital Economics, are likely to regain some ground in the coming months.

“Local officials have reportedly been told to fully utilise their special bond issuance quotas by the end of next month, which are used to finance infrastructure spending. Coupled with the ongoing recovery in international travel to and from China, this should boost commodity imports in the near term,” they added.

But Loo at Oxford Economics said they don’t expect exports to turn the corner until the first quarter of next year, “as the combined forces of a weak consumption recovery in the euro area, a potential recession in the US, and squeezed real incomes in the UK have weighed on the near-term outlook”.

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“[The trade figures] point to worsening growth prospects. A worsening export contraction means weaker production, while rapidly deteriorating imports reflect weaker demand within China,” said analysts at Nomura.

“Looking ahead, we expect for exports to contract at a similar scale until the end of 2023 and for China’s growth to take more time to rebound, given the double-whammy of the collapsing property sector and contracting exports.

“Markets appear to have become too bullish over the past couple of weeks by overestimating Beijing’s policy support and underestimating the downward pressures.”