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China's exports accelerate, but adverse global trade conditions cloud the picture

Image: Reuters Berita 24 English - As manufacturers ramped up following the easing of severe COVID lockdowns , China's exports surged a...


Image: Reuters

Berita 24 English - As manufacturers ramped up following the easing of severe COVID lockdowns, China's exports surged at their quickest rate in five months in June. However, a dip in imports and a gloomier global outlook suggested that the home economy might face some difficulties.

According to analysts, the increase in exports is a result of the supply chain snags and port congestion that dragged down the economy in earlier months after the government implemented comprehensive anti-virus efforts.

According to official customs data released on Wednesday, outbound shipments increased by 17.9% percent in June over the same month last year, which was faster than analysts' expectations of a 12.0% increase and the fastest growth since January. In May, outbound shipments increased by 16.9% over the same period.

According to Julian Evans-Pritchard, senior China economist at Capital Economics, "this uptick reflects the lessening of supply chain disruptions coming out of lockdowns and, most crucially, fewer bottlenecks at ports."

Despite little change in total container throughput at Chinese ports last month, he noted that the recent drop in domestic shipping demand has increased port capacity for foreign trade.

According to government data, the daily container throughput at the Shanghai port, which had previously been severely impacted by a lockout, had increased to at least 95% of the same level as a year prior in June.

Auto exports were a factor in the brisk development. According to customs figures, China shipped 248,000 vehicles in June, up 30.5 percent from the same month last year.

The strength of exports, according to analysts, is set to wane as rising global interest rates to control inflation hurt consumer spending and overall economic expansion.

Businesses and individuals are also concerned about potential pandemic limitations at home, and the conflict in the Ukraine has increased pressure on global supply lines.

Li Kuiwen, a spokeswoman for the General Administration of Customs, stated during a news conference in Beijing on Wednesday that China's overseas commerce still experiences instability and uncertainty.

While foreign commerce remained the "highest performing engine of the economy," according to Zhiwei Zhang, chief economist at Pinpoint Asset Management, the prognosis indicates "a rocky road with disruptions."

"The second half of the year's robust export growth may not be sustainable due to the developed countries' shifting demand from products to services. The recent (COVID) epidemic in Shanghai and other places has once again raised doubts about the strength of the third-quarter economic recovery "Zhang tacked on.

DOES UPSWING LAST?

China's economy began to grow last month as a result of government stimulus programmes and the removal of lockdowns. In April, it experienced a dramatic decline as the nation dealt with the largest COVID-19 outbreak since 2020.

In June, the nation's factory activity rebounded after three straight months of decreases, according to official and private assessments.

According to customs data released on Wednesday, imports increased just 1.0 percent in June compared to the same month a year earlier, down from May's 4.1 percent increase due to a lockdown-related decline in commodities imports and a decline in domestic demand. Analysts had predicted a growth of 3.9%.

With still strong COVID-19 limits in place, China's daily crude oil imports in June decreased by 11% from a year earlier to their lowest level since July 2018. Refiners predicted a decline in gasoline demand.

As a result of high worldwide pricing and a decreased demand for the oilseed, soybean imports also decreased by 23% from a year earlier.

In contrast to analysts' predictions of a $75.70 billion surplus and a $78.76 billion surplus in May, China reported a trade surplus of $97.94 billion last month.

Although policymakers intend to significantly increase infrastructure expenditure, many are sceptical that the country will achieve its 5.5 percent GDP goal this year without abandoning its tight zero-COVID policy.

While pressure from a weakening global backdrop increases, China's domestic engines of growth continue to be underperforming due to an unstable real estate market and weak domestic consumer expenditure.

The extremely contagious BA.5 Omicron sub-variant has been discovered in various places over the past week, adding to the challenges.

According to a note from Nomura analysts, as of Monday, 31 cities, or 17.5 percent of China's population and 25.5 percent of its GDP, had adopted complete or partial lockdowns or some control measures at the district level.

On Friday, China is expected to announce its second-quarter GDP figures.

According to a Reuters poll, the GDP likely increased by 1.0 percent from a year earlier in the April-June quarter, indicating that policymakers may need to take additional steps to encourage a quicker recovery.


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