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China’s exports fell sharply in dollar terms in March, partly on weaker demand from markets such as Europe and lower prices for Chinese goods, despite surging shipments from the world’s second-largest economy.
The value of China’s exports dropped 7.5 per cent in March against a year earlier, compared with a Reuters poll of analysts that forecast a contraction of 2.3 per cent. Import value was down 1.9 per cent, compared with analysts’ expectations of a 1.4 per cent increase.
The fall in the value of exports underlines the challenges facing Beijing as it turns to manufacturing and trade to try to steer the economy out of a deep slump induced by a slowdown in the property sector as well as weak consumer and investor confidence.
Chinese producers have been gaining global market share thanks to domestic deflationary pressures and oversupply driving down the cost of their goods.
Eswar Prasad, economist and professor of trade policy at Cornell University, said the decline in dollar terms was probably due to exchange rate factors and some “persistent weaknesses in some of China’s key foreign markets, particularly in Europe”.
But economists said the figures also reflected increasing margin pressure in China, where overcapacity in some sectors — particularly those favoured by industrial policy, such as electric vehicles, solar panels and other areas — was bringing down the cost of China’s exports.
“What matters are volumes, and when we compare volumes out of China, they’re running at record highs,” said Frederic Neumann, HSBC chief Asia economist. “The most intense price competition is actually happening in the high technology area for the production of vehicles, solar panels, wind turbines . . . so it is hitting economies like Germany, Korea, Taiwan, Japan.”
Beijing is facing increasing accusations from the US and Europe that its industries are heading into oversupply, leading to the danger of exporters dumping artificially cheap, subsidised goods on international markets.
China’s trading partners are calling on Beijing to invest more to stimulate domestic demand to fill the gap left by the property sector, which once accounted for nearly a third of gross domestic product.
China’s government has set what analysts describe as an ambitious target of 5 per cent GDP growth for 2024. Beijing has announced a programme to “upgrade” domestic industry and consumer goods in a bid to boost demand.
But US secretary Janet Yellen questioned Chinese officials this week on how they planned to meet their economic growth target if they did not do more to stimulate domestic demand.
The fall in March export revenue follows a sharp increase in January and February that was driven by a rebound in the electronics cycle and greater shipments to countries such as Russia.
China’s growing competitiveness on global markets is also leading to greater calls from foreign businesses for better access to its markets.
German Chancellor Olaf Scholz is due to visit China next week and expected to call on his counterparts to break down barriers for foreign companies in areas such as government procurement.
“China’s gaining market share vis-à-vis other Asian exporters and possibly against exports elsewhere in the world,” HSBC’s Neumann said.
The country’s low prices are good for consumers around the world and will help governments battling inflationary pressures, but it means greater competitive pressure for exporters in other countries, he added.
“That disinflationary effect is being exported to the rest of the region at least on the export side,” Neumann said.
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