BEIJING: China’s export slump is expected to have worsened in June due to sluggish overseas economies grappling with inflation and rising interest rates. As a result, these economies are buying fewer goods from Chinese factories. According to a poll of 30 economists, outbound shipments from the world’s second-largest economy are projected to have fallen by 9.5% year-on-year in June. This would mark an even bigger drop compared to May’s decline of 7.5%. The anticipated decline in June would be the most severe since January when China’s supply chains were hit by a wave of COVID-19 infections caused by the easing of pandemic-related restrictions.
In recent months, Chinese factory activity has been shrinking, leading to concerns of prolonged slower growth in the country’s economy. Economists forecast an annual growth rate of around 3%, which is less than half of the rates seen in previous decades. This slower growth creates an atmosphere akin to an economy in recession.
Out of the trade poll respondents, one-third predicted that exports in June would experience a double-digit percentage drop, similar to what happened in January. Societe Generale was the most pessimistic, forecasting a 15.7% decrease. Additionally, imports in June are expected to have shrunk by 4.0%, reflecting weak domestic demand. China’s trade data for June will be released on Thursday.
In June, Chinese consumer prices were on the verge of deflation, while producer prices fell at the fastest pace in over seven years. These developments strengthen the argument for more policy stimulus. Fitch Ratings noted that weakness in exports was evident in slower growth of daily average container throughput compared to the previous year. It also fell by 0.4% year-on-year in the first week of July.
Since taking charge of China’s economic policy apparatus in March, Premier Li Qiang has discussed implementing policy measures to boost demand and rejuvenate markets. However, concrete measures have yet to be announced, leaving investors desiring more information.
Credit: The Star : Business Feed
