The News
China’s trade numbers dropped in July, according to government data released Tuesday, a sign that the country’s economic rebound was lagging despite efforts by officials in Beijing to revive growth.
Exports from China, which has the world’s second-largest economy after that of the United States, have now declined for three months in a row while imports have fallen for five consecutive months. The numbers reflect declining foreign demand for Chinese-made products, falling domestic demand, a real estate crisis and geopolitical tensions, including the war in Ukraine.
Exports will probably continue to fall for the rest of the year, Nomura economists wrote in a note to investors.
“These readings point to worsening growth prospects,” they said. “A worsening export contraction means weaker production, while rapidly deteriorating imports reflects weaker demand within China.”
The Numbers
China’s exports dropped 14.5 percent in July from the same point last year, the biggest decline since February 2020, when the coronavirus pandemic sent the world into lockdown and tangled global supply chains. Imports fell 12.3 percent in the same period.
In the first seven months of the year, exports to the United States declined 18.6 percent from a year earlier, while shipments to the European Union fell 5 percent. Exports to Russia, which has been hit with Western sanctions over its invasion of Ukraine, increased more than 70 percent.
Mexico and Canada surpassed China this year as the United States’ top trading partners, as American companies seek to bring their supply chains closer to home. Foreign investment in China dropped more than 80 percent in the second quarter from a year earlier, according to Chinese government data released Friday.
Why It Matters
As developed countries like the United States tackle inflation by cooling demand, consumers are shifting spending from goods to services, Paul Donovan, chief economist at UBS, said in a note to investors.
“There has been general weakness in demand for China’s exports,” he said.
Officials in Beijing have been trying to foster a rebound from an economic slump after nearly three years of pandemic restrictions. After China ended its lockdowns last December, many expected the economy to bounce back, but recovery has been halting.
A real estate crisis and weak spending by consumers have put pressure on Beijing to increase exports to help stabilize the economy. But the trade numbers released on Tuesday suggest that weak demand may exacerbate a global slowdown.
