Chinese Export Performance Surpassing the Expectations as Economies Reopen After the Shutdown
China’s export rose for the third consecutive month in August, meanwhile, the imports plummeted. There is an estimated extended fall in imports and a rise in exports as more of its trading partners lifted the lockdown, which was implemented to curb the spread of the novel coronavirus. This pattern is expected to favour the export performance of China, which is likely to enhance the economic growth of the country.
Customs data showed that exports in August rose by 9.5% from a year earlier, marking the strongest gain since March 2019. This growth has beaten the expectations of many analysts, who were anticipating a 7.1% growth and compared with a 7.2% increase in July. Imports, on the other hand, slumped 2.1% compared with market expectations for a 0.1% increase and extended a 1.4% fall in July. The strong exports are likely to upsurge the Chinese economy. It can result in a faster and more balanced recovery of the Chinese economy, which is rebounding from a record first-quarter slump.
Chinese exports continue to defy expectations and is growing faster than global trade, thus regaining global market share. Whereas, there was a need for caution pertaining to the import data, which was disappointing as the growth of China’s domestic demand was assessed. According to a survey based on manufacturing activity, the overseas demand for various products slowly revived, and Chinese firms reported the first increase in new export orders this year in August. The expansion of production was bolstered by the pick-up in business, marking the sharpest gain in almost a decade. Some analysts feared that the global slowdown might affect the Chinese export performance, but instead, the performance was boosted by record shipments of medical supplies and remarkable demand for electronic products.
But, at the same time, the region is witnessing an unexpected drop in imports, suggesting softer domestic demand. In August, copper imports eased from the previous month’s all-time high, due to the falling demand from the key consumption sectors and the disruption in supply chain, which adversely affected the transportation of overseas metal. Further, coal imports dropped 20.8% in comparison to the previous month. Having said that, the imports were largely stable in terms of volume. It is expected that with credit growth still accelerating, and infrastructure led stimulus still ramping up, import volumes will remain strong in the coming months.
In August, China issued a trade surplus of USD 58.93 billion, compared with the earlier forecast for a USD 50.50 billion surplus and USD 62.33 billion surplus in July. However, the outlook is still far from rosy due to the volatile conditions, as external demand could still suffer if the virus control measures are reimposed by trade partners later this year due to the resurgence of the pandemic. China is also looking for ways to reduce its dependence on overseas markets for its development, as the U.S. hostility and the pandemic may increase external risks that could impede the country’s economic growth. In February, China, under an agreement, pledged to boost purchases of U.S. goods, but the region is well behind its plan. However, in August, China’s trade surplus with the United States expanded to USD 34.24 billion from a value of USD 32.46 billion in July.
In August, trade officials of the U.S. and China reaffirmed their commitment over the phone to a phase 1 trade deal. Both the regions seek progress, and thus, are determined to take the necessary actions to ensure the success of the agreement. Last week, the U.S. Trade Representative’s office extended the tariff exclusions for a wide range of Chinese goods, including smartwatches and some medical masks, but only through the end of 2020. This move may increase uncertainty for businesses, but may create some leverage for the United States in bilateral trade negotiations.