China’s exports contracted in March after showing growth in the first two months of the year, highlighting the uneven recovery from the pandemic. Customs data revealed a 7.5% decline in exports and a 1.9% decrease in imports, falling short of estimates. The economy has slowed due to a crisis in the property industry caused by excessive borrowing. Despite this, China posted a trade surplus of $58.55 billion in March, compared to $125 billion in the first two months of the year. The decline in exports can be attributed to a higher comparison base with March 2023, when exports surged as the economy reopened after COVID-19 restrictions.
Economists believe that export volumes will rise slower this year due to cooling consumer spending in advanced economies and decreasing export prices. However, imports are expected to gain momentum as government spending increases demand. A recent survey showed manufacturing activity expanding for the first time in six months, with new export orders seeing growth for the first time in nearly a year. China has set a target of around 5% for economic growth this year, requiring additional policy support. There are concerns that ramping up exports to meet the growth target may lead to excess capacity in various industries, particularly in electric vehicles.
U.S. Treasury Secretary Janet Yellen raised concerns about overcapacity during her recent visit to Beijing, where she met with top leaders. The issue of exporters slashing prices to increase sales has been noted, but manufacturers are facing mounting losses and reduced capacity to further lower prices. Data showed that consumer prices grew only marginally in March, while producer prices declined, indicating weakness in demand compared to supply. Wang Lingjun of the General Administration of Customs stated that weak producer prices do not necessarily indicate overcapacity, citing factors such as raw material price fluctuations and technological updates.
Despite the challenges, Chinese products like construction machinery and ceramics are favored worldwide for their reliability and durability. Wang Lingjun emphasized that Chinese goods are welcomed globally for their innovation and quality. The government is focused on enhancing the competitiveness of Chinese products in the global market through quality improvements and technological innovation. The export contraction in March reflects the complexities of China’s economic recovery post-pandemic, with policymakers needing to navigate challenges in both domestic and international markets to achieve sustainable growth.
