Thursday, July 13, 2023

"China’s Worse-Than-Expected Exports Deal New Blow to Economy"

 Yes, new but not unforeseen.*

From Bloomberg via MSN, July 13:

China is facing pressure on trade as foreign shipments drop off and domestic demand remains weak, with a darkening global growth outlook and geopolitical tensions making a reprieve unlikely anytime soon.

The country’s exports fell 12.4% in dollar terms in June from a year earlier, the customs administration said Thursday. That was the second straight month of declines and the biggest drop since the pandemic hit in early 2020. Imports slumped 6.8%, the customs data showed. 

That left a trade surplus of $70.6 billion for the month. Economists had forecast that exports would drop 10% while imports would shrink 4.1%.

Global demand had been a strong driver of China’s growth over the past three years, although that began to fade in late 2022. Exports have now fallen for four of the six months so far in 2023.

As global growth slows and as many central banks still seem poised to raise interest rates to push down inflation, it appears increasingly unlikely that foreign demand for Chinese goods will be able to help the world’s second-largest economy as its rebound falters.

“We see little respite for China’s exports in the second half, as the US is likely to enter a mild recession, while the Eurozone economy probably will remain weak,” Duncan Wrigley, chief China economist at Pantheon Macroeconomics, wrote in a note after the data release....

*A few of our previous comments on the Chinese economy:
November 24: 
"Copper: What's Your Timeframe?":
....For now and into Q2 2023 the West and maybe China have a recession they have to get through. 
December 4:
"Chinese factories are shutting down two weeks earlier than usual ahead of Chinese New Year"
It really is starting to appear that China could see a recession* caused by slowdowns in their Western customers' economies.It's only recently that we've started thinking the previously unthinkable...
December 14, 2022 
February 12
IMF: China Should "Coax" The Masses Into Saving Less and Consuming More
The underlying fact set was the point of the intro to and outro from January 31's "What If China Had A Reopening And Nobody Cared?":
China isn't reopening, it has reopened. This is it. And despite the record savings the population has accumulated over the last three years we are not seeing a wave of demand in the domestic economy. Using one of the most basic proxies for what is actually going on, the price of pork, the grand reopening, is, to say the least, muted. This is especially true considering the country just celebrated the largest, most festive holiday on the calendar.
One data point does not make a trend but it does raise the possibility that the facile expectation of a boom in Chinese consumption is wrong.

What if, and I'm just spitballing here, what if the giant ball of savings is being targeted by the rapidly aging population as a retirement cushion, i.e. future consumption, not current?

That would leave China's export economy to carry the weight.

And that is not looking very promising at the moment:....
Here's the outro from a May 8 post:

...If you saw the Chinese export numbers an hour ago you know there is no Chinese cavalry riding to the rescue of the Western economies. Chinese imports were flat. No uptick in demand for anything the west produces. Exports increased 8.5%, showing just how dependent China remains on the West staying out of recession., CNBC:

China’s exports rose 8.5%, continuing its growth streak at a slower pace