China’s trade recession eases with signs of stabilization

BEIJING (Reuters) – China’s exports and imports continued to decline in August as the dual pressures of falling external demand and weak consumer spending at home weighed on companies in the world’s second-largest economy, although the declines were slower than expected.

While the trade numbers track a series of other indicators showing a potential stabilization in China’s economic downturn, they are still well below growth economists’ expectations earlier this year when the government abandoned its tough coronavirus restrictions.

Customs data showed on Thursday that exports fell 8.8 percent in August year-on-year, exceeding expectations for 9.2 percent growth in a Reuters poll and less than a 14.5 percent decline in July. Meanwhile, imports contracted by 7.3%, slower than the expected 9.0% decline and last month’s 12.4% decline.

China’s economy faces the risk of missing Beijing’s annual growth target of about 5%, as officials grapple with a worsening property decline, weak consumer spending and declining credit growth, prompting analysts to cut forecasts for this year.

“The trade data is marginally better, but I don’t think we should overdo it: trade is still contracting,” said Frederic Neumann, chief Asia economist at HSBC.

He added: “There are some signs here of stability, but I think there is still a long way to go.”

Beijing has announced a series of measures in recent months to support growth, with some borrowing rules eased last week by the central bank and the top financial regulator to help homebuyers.

But analysts warn that these steps may have little impact as the labor market recovery slows and household income expectations remain uncertain.

“The numbers suggest that headwinds remain, despite some marginal improvement,” said Zhou Hao, chief economist at Guotai Junan International. “Looking ahead, whether Chinese trade growth has truly bottomed out will depend on several factors, the most important of which is clearly domestic demand.”

Governments around the world are concerned about the economic slowdown in China as many exporting countries rely heavily on the country’s market for growth.

South Korean shipments to China, a key indicator of the latter’s imports, fell by just a fifth last month, slowing from a 27.5% decline the previous month, marking another sign of stabilizing conditions in China.

Declines in trade with the United States, Southeast Asia and Australia also narrowed.

However, trade with Japan fell sharply, as outbound shipments from China to its neighbor fell by 20% in August year-on-year, while imports worsened by 17%.

Policymakers in Tokyo fear that China’s worsening economic problems will affect Japan’s fragile recovery, especially if Beijing fails to support demand with real stimulus.

Crude oil shipments to China rose 31% in August from the same time last year, and 21% in July, while soybean imports in August also jumped 31% from a year ago, encouraged by cheap prices in Brazil.

While some analysts saw signs of stability in the data, investors were not very impressed with the yuan’s decline near a 10-month low and the Australian dollar, seen as an indicator of Chinese growth, falling after the data.

China recorded a trade surplus of $68.36 billion in August, compared to an expected $73.80 billion and $80.6 billion in July.

“Given the low base at the end of last year, it is very likely that exports will return to growth at the end of this year,” said Ne Win, an economist at Huabao Trust.

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