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China’s exports suffered their biggest year-on-year decline since the start of the coronavirus pandemic, adding to concerns about the growth path of the world’s second-largest economy.
Official data showed on Thursday that June exports fell 12.4 percent year-on-year in dollar terms, the sharpest drop since February 2020. Economists polled by Reuters had expected a 9.5 percent decline.
Imports fell 6.8 percent, also beating expectations. In May, exports and imports fell by 7.5 percent and 4.5 percent, respectively.
China’s exports have been hit this year by weak international demand at a time when the economy is already strained by a struggling real estate sector and a disappointing recovery after the lifting of Covid-19 restrictions at the start of the year.
Youth unemployment is also at its highest level since China began reporting data in 2018, while weak consumer demand has helped push the country to the brink of deflation.
“China has to rely on domestic demand,” said Qiu Zhang, president of Pinpoint Asset Management. “The big question for the next few months is whether domestic demand can rebound without a lot of stimulus from the government.”
The General Administration of Customs said on Thursday that trade growth is facing “relatively great pressure”, citing economic and geopolitical risks. It said exports in yuan grew 3.7 percent in the first half of the year.
GDP data due for release on Monday will shed more light on the health of the Chinese economy. The government has set an official growth target of 5 percent for the full year, the lowest in decades, after recording growth of just 3 percent in 2022. Premier Li Qiang said last month that second-quarter performance would outpace the first quarter by 4.5 percent. .
China’s policymakers have so far held off on large-scale stimulus, instead easing key interest rates last month to support growth. They also introduced cautious measures to support the real estate industry, which accounts for more than a quarter of economic activity but is grappling with a wave of defaults.
Inflation data this week showed the country was on the cusp of consumer price deflation, indicating continued weakness in domestic spending after months of abandoning the anti-Covid regime. Factory gate prices are already in negative territory.
After an initial decline, China’s exports rose in the early stages of the pandemic as consumption in other countries shifted toward goods and away from services. Official data often reflects double-digit relative increases.
Thursday’s data showed a reversal, with widespread declines across categories including mobile phones, computers, steel exports and apparel.
One exception was auto exports, which increased by $4.1 billion compared to the same period last year.
Exports to Russia and Singapore also increased in dollar terms, but merchandise to all other major economies declined.