Coronavirus Hit on China Trade Eases, but Export Outlook Is Bleak
Date: Wednesday, April 15, 2020
Source: The Wall Street Journal
Chinese businesses are bouncing back, but the pandemic has depressed economic activity and consumer demand in key Western markets
BEIJING—China’s imports and exports fell by smaller margins in March than in the first two months of the year as businesses there began to recover from the coronavirus pandemic, but officials and analysts warned of a grim outlook for the world’s largest exporter as global economic activity collapses.
Outbound shipments from China dropped 6.6% in March from a year earlier, following a 17.2% decline in the January-February period, data from the General Administration of Customs showed Tuesday. The fall was much less steep than the 15.9% decline estimated by economists polled by The Wall Street Journal.
Imports fell 0.9% year over year last month, compared with a 4% decline in the first two months of the year—and a 10% fall predicted by the economists. Overseas purchases of farm goods, commodities and medical supplies increased as Beijing moved to restart China’s economy after making progress in containing the coronavirus.
Overall in March, China notched a trade surplus of $19.9 billion, reversing a $7.1 billion deficit in the first two months of the year.
“March’s exports were buoyed by shipment of products that were undelivered in the first two months when China was snarled by the coronavirus,” said Zhaopeng Xing, an economist with ANZ.
China imposed factory shutdowns and tightened travel restrictions in late January when the severity of the viral outbreak first became clear to the central government in Beijing. The prevention measures put a virtual halt to all economic activity, including foreign trade, during the first two months of the year, which were reported together because of the timing of Lunar New Year holiday.
When China’s businesses began to bounce back in March, the coronavirus had engulfed much of the rest of the world, depressing economic activity and consumer demand in many of the Western markets that China’s exporters rely on.
“The difficulties for Chinese exporters are weakening demand and plunging global growth amid the coronavirus pandemic,” said Mr. Xing, who predicts China’s exports will fall by about 20% year over year in the second quarter.
Following the government’s work resumption efforts, a majority of Chinese exporters have restored at least 70% of their production capacity, data from the Ministry of Commerce showed. But on Tuesday, ministry officials worried openly about the setbacks many exporters are facing as existing overseas orders are canceled and new orders dry up.
Demand from Europe and the U.S.—two of China’s biggest trading partners—has fallen. In March, shipments to the two markets fell by more than 20% compared with last year.
China’s customs bureau said Tuesday that, as a collective bloc, the Association of Southeast Asian Nations overtook the European Union to become China’s biggest trading partner for the first time. Sluggish demand in Europe was to blame, but so was Great Britain’s exit from the EU at the end of January.
The U.S. was surpassed last year by Southeast Asia’s Asean nations as China’s second-biggest trading partner as Beijing and Washington escalated their trade fight.
Still, despite a drop in total trade with the U.S., China’s imports of agricultural products from the U.S. rose sharply in the first three months of the year, as the two countries implemented the first phase of its trade deal, official data showed. By tonnage, China’s purchases surged—soybean up 210%, pork 640% and cotton 43.5%—between January and March compared with a year earlier, said customs spokesman Li Kuiwen.
Officials and analysts said trade with Southeast Asia fared relatively better because these markets are less affected by the coronavirus. Also, some electronics products were also transshipped through the region after the U.S. levied higher tariffs on Chinese goods, analysts said.
The World Trade Organization has forecast the volume of the global goods trade to fall by between 13% and 32% this year compared with 2019, though the calculations are subject to uncertainty about how the pandemic will evolve. Still, the estimates put the pandemic’s impact on track to exceed that of the global financial crisis in 2008 and 2009, when the global trade in goods fell 12%.
In response to demand-side shocks, Beijing has introduced policies to stabilize trade, including cutting some fees and moving its main trade fairs online.
To help struggling businesses, China has pumped billions of dollars of liquidity into the financial system, cut its benchmark lending rates, lowered taxes for small businesses and offered a longer grace period for household and corporate borrowers to repay their debts.
But predicting the volume of imports Chinese consumers will be able to absorb is difficult when many indicators of domestic economic growth have fallen to their lowest levels in decades.
China’s retail sales, a key gauge of consumption, fell by more than 20% in January and February. Overall economic growth is expected to fall by 8.3% in the first quarter from a year earlier, according to a poll of economists by The Wall Street Journal. That would mark the first quarterly contraction in gross domestic product since the government started to release the data in 1992. The National Bureau of Statistics will release GDP data Friday.