After cities close due to disease, Chinese trade suffers

After cities close due to disease, Chinese trade suffers

China’s export growth slowed in April as global demand fell, adding to the burden on the world’s second-largest economy following the closure of Shanghai and other industrial towns due to virus outbreaks. Customs data revealed Monday that exports increased 3.7 percent year over year to USD 273.6 billion, down considerably from March’s 15.7 percent gain. Imports increased 0.7 percent to USD 222.5 billion, matching the previous month’s gain of less than 1%. High inflation and interest rate hikes in the United States and other major markets, as well as consumer concern about the economy and job prospects, are putting downward pressure on demand for Chinese exports. Companies and investors worry the ruling Communist Party’s “zero-COVID” strategy that shut most businesses in Shanghai and other industrial centers will disrupt global trade and activity in autos, electronics, and other industries.

Authorities have eased controls on Shanghai and allowed millions of people out of their homes, but restrictions have tightened in Beijing and some other cities. Managers of the Port of Shanghai, the world’s busiest, said it is functioning normally, but figures they cite for the daily cargo volume it handles are down 30% from normal. Shippers say they are avoiding the port out of concern there aren’t enough truck drivers available to carry their goods. Auto factories and other manufacturers that tried to keep operating by having staff live at their facilities were forced to reduce or stop production because supplies of components were disrupted. China’s economy grew by a weak 4.8 percent over a year earlier in the quarter ending in March, up from 4 percent from the final three months of 2021. Economists warned, however, that there would be more downward pressure on activity in the April-June quarter due to anti-virus controls. Consumer demand for imports has been depressed by an official campaign to cut debt in China’s vast real estate industry, which supports millions of jobs. That triggered an economic slowdown in the second half of 2021.

“Virus disruptions continued to take a toll but the main headwind to exports is weakening foreign demand,” said Julian Evans-Pritchard of Capital Economics in a report. “We expect export volumes to fall further over the coming quarters.” Forecasters expect Chinese industrial activity to improve this month as infections ease, but President Xi Jinping last week affirmed Beijing’s commitment to “zero-COVID,” prompting expectations it will weigh on manufacturing, retailing and trade. Exports to the United States rose 9.5 percent to USD 46 billion despite lingering tariff hikes in a fight over Beijing’s technology ambitions. Imports of American goods advanced 0.9 percent to USD 13.8 billion. China’s global trade surplus widened by 19.4 percent to USD 51.1 billion while the politically volatile surplus with the United States contracted by 65 percent to USD 9.8 billion. China’s case numbers in its latest outbreaks are relatively low, but Beijing’s insistence on isolating every infected person kept most of Shanghai’s 25 million people confined to their homes. Access to Guangzhou, a manufacturing and trading center in the south and industrial center Changchun in the northeast were suspended.

Weak Chinese demand can have global repercussions, depressing imports of oil, iron ore, industrial components, and consumer goods. Exports to the 27-nation European Union rose 8 percent to USD 43.1 billion while imports of European goods gained 12.5 percent to USD 23.4 billion. China’s trade surplus with Europe widened by 49.6 percent to USD 19.6 billion. Imports from Russia, a major gas supplier, jumped 56.6 percent over a year earlier to USD 8.9 billion, possibly reflecting the surge in global energy prices due to jitters over supply disruptions caused by Moscow’s war on Ukraine.Beijing has criticized trade and financial sanctions imposed on Moscow by the United States, Europe, and Japan. But Chinese companies appear to be abiding by them while trying to guard against  possible losses in dealings with Russia.

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