A decelerated contraction rhythm observed in China’s import and export sector casts a beam of hope on its economy, according to customs data, positioning the country’s economy for a gradual stabilization. Despite the scale of the task at hand, including an ongoing property crisis, persistent deflation, global economic downturn, and a tense geopolitical atmosphere, the signs of a subdued decline in two consecutive months show a silver lining.
Notably, September witnessed a 6.2% decrease in outbound shipments, a marked improvement as compared to a 8.8% drop in August. This positive variation has surpassed the predictions set by economists at 7.6%. Corroborating this is the surge in export orders, documented last month by an official manufacturing survey that captured an optimistic market scenario, prompted by the Christmas shipping peak season.
Senior Economist at The Economist Intelligence Unit, Xu Tianchen, regards the current upward turn in the global electronics sector as a propitious sign, hinting at a revival of China’s trade situation. The decreased pace at which South Korean exports to China, primarily comprising semiconductors, fell in September also suggests a rebounding interest among Chinese manufacturers to repurpose components into finished products.
The Baltic Dry Index serves as a testament to a global uptick in trade activities for September. However, the path to recovery is not free from challenges, as suggested by Lv Daliang, spokesperson of the General Administration of Customs. He expressed his concern over the complex and severe external dynamics that China’s trade would need to navigate.
Simultaneously, there is a silver lining to this cloud, with domestic demand exhibiting signs of recovery. Even though imports dropped by 6.2%, the fall was less than the 7.3% shrinkage that August witnessed. These dynamics have led to an expanding trade surplus that reached $77.71 billion in September, a favourable turn as compared to the predicted $70 billion or August’s $68.36 billion.
Economic analysts, however, caution against premature optimism, highlighting the unpredictable nature of domestic demand amidst a troubled property sector, unstable job market, household income growth, and unsteady confidence among private firms. A comprehensive economic upturn is still an uphill climb.
Facing such challenges, the second quarter witnessed the already slowing economy lose further momentum, forcing policymakers to introduce measures with the aim of fueling economic recovery. Data released earlier this month indicates an entrenched deflationary pressure continuing to weigh on the economy.
However, positive signs have emerged in the form of promising retail sales figures, increased factory activity, and a 4.1% surge in holiday travel as compared to pre-pandemic levels in 2019. As officials strive to meet China’s annual growth target of 5%, there are ongoing talks of issuing an additional 1 trillion yuan ($137.00 billion) of sovereign debt to fund infrastructure projects and spur economic growth.
Several analysts consistently maintain that the incremental measures won’t be enough – the policymakers need to make a move on a greater scale. While the path to economic revival may be fraught with difficulty, as Robert Carnell, regional head of research Asia-Pacific at ING, remarks, these strategies can at least serve as a crisis management tool in the transition to a less leveraged economy.
