China’s Exports Plunge Amid Coronavirus Epidemic

Date: Monday, March 9, 2020
Source: The Wall Street Journal

Country’s exports drop 17.2%, marking the sharpest contraction in nearly a year

BEIJING—China’s exports and imports tumbled in the first two months of the year, official data showed Saturday, as the coronavirus epidemic and measures to contain its spread disrupted production and shipment while hitting global supply chains.

China’s exports plunged 17.2% in the January-February period compared with a year earlier, reversing the 7.6% year-over-year increase recorded in December while marking the sharpest contraction in nearly a year. Economists polled by The Wall Street Journal earlier expected a 17% year-over-year fall.

Imports by the world’s second-largest economy, meanwhile, dropped 4% in the first two months of the year from the same period a year earlier, after notching up a 16.3% year-over-year increase in December. The decline in imports was far less than economists’ expectation for a 16% fall.

China’s customs bureau, the General Administration of Customs, said last month that it would combine trade data for January and February, in line with many other data releases by the National Statistics Bureau—part of an effort to iron out disruptions to economic activity from the annual Lunar New Year holiday, which falls at a different time each year in the first two months.

While exports were dampened by production suspensions and logistical snarls caused by the widespread quarantining and lockdowns of many parts of the country, China stepped up imports of commodities and farm goods in the first two months.

The volume of pork imports was 1.6 times the volume from the same period a year earlier, while purchases of natural gas and soybeans from outside the country rose by double-digit percentage points from a year earlier, the customs bureau said.

In the first two months, China recorded a $7.09 billion foreign trade deficit, its first deficit in almost two years, according to the official data.

China’s exports had shown signs of recovery at the end of 2019 as trade tensions with the U.S. eased. But the recovery hit a wall in January after the coronavirus outbreak, first detected in the central Chinese city of Wuhan in December, quickly swept across China, infecting more than 80,000 people and killing more than 3,000 in mainland China alone.

To contain the epidemic, Beijing ordered factories and businesses to extend their Lunar New Year holidays, while advising residents to avoid travel and group gatherings. These public-health measures have paralyzed large parts of an economy whose growth had already slowed in 2019 to a nearly three-decade low.

Wary of deepening the country’s economic woes, President Xi Jinping urged less-affected regions to resume work as soon as possible and rolled out measures to help companies resume production.

Work and production restrictions in most parts of the country were lifted in mid-February, but business has climbed back only slowly in the past few weeks as many workers still face difficulties returning to their jobs from their faraway hometowns. Even many factories that have resumed work are still running well below normal capacity, economists have warned.

Measures of economic activity, including power production, subway traffic in major cities, property transactions and auto sales also remain well below normal levels.

Even as China struggles to ramp up production, it faces a new headwind in a coronavirus epidemic that has now spread around the globe, depressing demand for Chinese-made goods from other countries.

The virus has sickened more than 17,000 people outside of China and killed more than 300. Some South Korean factories, including those of Hyundai Motor Co. and Samsung Electronics Co., have shut down their production lines after workers tested positive.

Exporters surveyed by China’s Ministry of Commerce said they have had difficulty fulfilling overseas orders as factory shutdowns have lengthened and the shortage of workers, parts and raw materials has worsened. Many foreign customers have suspended purchases or canceled orders, they added.

“While trade data in the first two months reflected disruptions from the coronavirus epidemic, China’s exports are set to face more headwinds from the virus spreading to other parts of the world that could depress global growth and demand,” said Tang Jianwei, an economist with Bank of Communications.

Economists have sharply cut projections for China’s economic growth in the first quarter of the year. Many have questioned the country’s ability to meet its political goal of doubling the overall size of the economy by the end of the year from a decade earlier, which economists say requires China to grow its economy by at least 5.5% this year.

With the downside risk growing from the global spread of the coronavirus, Beijing will likely have to rely more on domestic demand and stimulus measures to shore up growth in 2020, said Mr. Tang, who called for policies to boost property and infrastructure investment and consumer demand.

Even with all those measures in place, Mr. Tang warned, “China still faces great pressure to realize this year’s economic goals.”

 

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