China Counters Coronavirus Crunch With a Surprise Rise in Exports

Date: Friday, May 8, 2020
Source: The Wall Street Journal

Outbound shipments rise 3.5% in April compared with a year earlier

BEIJING—Chinese exports rose unexpectedly in April, bucking a pandemic-induced economic slump that has crimped demand and disrupted supply chains world-wide.

But economists warned that Chinese exporters may be enjoying a temporary reprieve and aren’t likely immune to a global downturn that remains highly uncertain—a reality underscored by a surprise plunge in Chinese imports.

China’s outbound shipments rose 3.5% in April compared with a year earlier, compared with the 6.6% year-over-year decline in March, data from the General Administration of Customs showed Thursday. The result was far better than the 18.8% year-over-year drop expected by economists polled by The Wall Street Journal.

China’s April export figure reflected a clearing of backlogs of delayed orders from earlier this year due to the coronavirus outbreak, economists said. Southeast Asia, which as a bloc surpassed the European Union and the U.S. as China’s largest export destination earlier this year, continued to offset losses from more advanced Western economies.

Chinese officials also highlighted increased demand from countries that signed on to Beijing’s infrastructure-and-trade project, the Belt and Road Initiative, which are primarily clustered in Central Asia, Africa and the Middle East.

Chinese imports, meantime, fell 14.2% last month, far sharper than March’s 0.9% drop and the biggest decline since February 2016, indicating rapidly weakening demand at home.

The unexpected surge in exports and drop in imports helped China’s trade surplus balloon to $45.34 billion last month, compared with a $19.9 billion surplus in March.

Economists, and Chinese government officials, are generally pessimistic about China’s ability to sustain the April export strength, particularly as the growth picture sours further in the U.S. and Europe.

“The risks and challenges for foreign trade are unprecedented,” said Gao Feng, a spokesman for the Ministry of Commerce, in a briefing in reference to China’s foreign trade.

Major exporters surveyed by the commerce ministry are still facing order cancellations and delays, or are having difficulties winning new orders and delivering products to their customers, Mr. Gao said. He said the government would roll out targeted measures to help exporters win new orders and help some of them sell more at home.

“While demand in emerging markets is resilient, it’s not enough to offset declines from other major trading partners in European and the U.S., which will feed through to weaker exports in coming months,” said Liu Xuezhi, an economist with Bank of Communications.

Underscoring the challenges ahead, official and private surveys of Chinese purchasing managers in April showed new export orders falling deeper into contractionary territory.

In data released Thursday, a private gauge of China’s service-sector activity—the Caixin services purchasing managers index—improved slightly in April, though it remained in contraction, a gloomy result that reflects quickly weakening foreign demand.

Another major cause of concern is rising geopolitical tensions between Washington and Beijing over China’s handling of the coronavirus outbreak.

President Trump said Wednesday he was “watching closely” to see if China would fulfill its commitment under the “phase one” trade deal signed earlier this year, which commits Beijing to purchasing an additional $200 billion in U.S. goods and services over the next two years.

The goal now appears out of reach, particularly in the wake of the pandemic, and some economists—including Julian Evans-Pritchard, senior China economist for Capital Economics—see rising risks that the phase one trade deal “soon falls apart.”

Mr. Trump has hinted at levying additional tariffs on Chinese goods, which could heighten tensions between the world’s two largest economies at a time of great vulnerability for the global economy.

As new coronavirus cases have ebbed in China, where the first outbreak emerged late last year, Beijing has moved to restart its economy by reopening factories and businesses, resuming construction projects and handing out consumer vouchers to boost spending.

However, high-frequency data shows the recovery’s pace remains slow. Restrictions on human movement remain in place, tens of millions of workers have lost their jobs and a cloud of uncertainty hovers over the economic outlook.

In one recent indicator, official data showed economic activity during a recent five-day holiday, from May 1 to May 5, fell well short of last year’s levels, despite being a day longer.

When April data on fixed-asset investment and retail sales are released next week they are likely to show continued contraction, economists polled by the Journal have said. These economists remain optimistic, however, that industrial production could show a small increase from a year earlier.

Economists, investors and analysts are looking to a coming annual legislative conclave, set to begin on May 22, for clues about the government’s response. The legislative meeting, which will follow a postponement of more than two months, is typically the venue where Beijing’s leaders unveil their annual economic targets and spending plans.

China’s economy shrank by 6.8% in the first quarter from a year earlier, the first such contraction in more than four decades. Analysts widely question whether Beijing can meet its year-end political goal of doubling the size of the overall economy from a decade ago, a goal that economists say requires at least 5.5% growth this year.

China has pledged to increase the fiscal deficit ratio, issue more government bonds to fund investment and help businesses and individuals that have been hit hard by the coronavirus.

Separately on Thursday, China’s foreign-exchange regulator said the country’s foreign-currency reserves rose by $30.83 billion to $3.091 trillion at the end of April—the product of higher asset prices and a weakening U.S. dollar that drove up valuation of nondollar assets.

 

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