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China reports biggest drop in exports since 2020 in blow to recovery


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China in July suffered its biggest fall in exports for more than three years, official data showed on Tuesday, as the world’s second-largest economy is battered by sluggish global demand and a domestic slowdown.

The data will likely ramp up calls for leaders to do more to revive growth, after they laid out a series of stimulus measures in recent weeks focusing on consumers and the troubled property sector.

Sales of Chinese products to foreign markets sank 14.5 per cent year on year in July, a third consecutive drop, according to the customs authority.

The decline was bigger than expected and the heaviest since a 17.2 per cent plunge in January-February 2020, when the economy came to a standstill in the early weeks of the Covid-19 pandemic.

Apart from a brief rebound in March and April, exports have been in constant decline since October.

The threat of recession in the United States and Europe, combined with high inflation, has contributed to weakening international demand for Chinese products in recent months.

Shipments to the European Union in the first seven months of 2023 came to 2.08 trillion yuan (S$389.9 billion), down 2.6 per cent, the Customs authority said in a separate statement on Tuesday.

Meanwhile, imports shrunk a forecast-busting 12.4 per cent, a ninth straight month of contraction and further evidence that domestic demand has fallen off a cliff.

“China trade figures for July disappointed again,” Mizuho Bank analyst Ken Cheung Kin Tai wrote in a note.

“The weak trade figures highlighted the sluggish external demand, while (importers) refrained from purchasing goods for domestic production and investment,” he said.

“In this context, renminbi depreciation could serve as a tool to support China exports and facilitate economic recovery.”

Domestic slowdown

The trade figures are the latest indication that China’s post-Covid-19 recovery has run out of steam, following a brief surge after officials removed growth-killing zero-Covid measures at the end of 2022.

The economy grew just 0.8 per cent quarter on quarter in April-June, while youth unemployment reached record highs of more than 20 per cent.

July’s official manufacturing purchasing managers’ index – a key measure of factory output – came in at 49.3, below the 50-point mark that separates expansion and contraction.

And the property sector remains in turmoil, with major developers failing to complete housing projects, triggering protests and mortgage boycotts from home buyers.

The authorities have come under increasing pressure to introduce fresh stimulus after months of debilitating data.

The top leadership, known as the Politburo, has pledged to provide much-needed support to the economy but warned it faces “new difficulties and challenges” as well as “hidden dangers in key areas”.

China’s State Council in July released a 20-point plan to increase consumption across the board, touching on housing, culture and tourism, as well as green consumption such as electric vehicles.

The central bank has also cut several interest rates in recent weeks in an effort to reinvigorate the economy.

However, analysts have warned that vast local government debt piles and official determination to put the country on a more sustainable growth trajectory, and away from state investment, mean the wide-ranging bazooka measures of the past are unlikely.

Beijing is aiming for about 5 per cent growth in 2023, one of the lowest targets set by the Asian giant in decades, and one that Premier Li Qiang has warned will not be easy to achieve.

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