China’s shrinking imports, slow export growth darken economic outlook

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by Joe Cash

BEIJING (Reuters) – China's imports fell sharply in April while exports grew at a slower pace, reinforcing signs of weak domestic demand despite the lifting of COVID restrictions and already struggling global growth to slow. The pressure on the economy increased.

China's economy grew faster than expected in the first quarter, thanks to stronger consumption of services, but factory output lagged and the latest business numbers home a long road to regaining pre-pandemic momentum points to.

Inbound shipments to the world's second-largest economy fell 7.9% year-on-year in April, extending the 1.4% decline seen a month earlier, while exports rose 8.5%, down from a 14.8% increase in March. Customs data showed on Tuesday.

Economists in a Reuters poll predicted no growth in imports and 8.0% growth in exports.

“Earlier this year, one might have assumed that imports would easily surpass 2022 levels after reopening, but this has not happened,” said Xu Tianchen, an economist at the Economist Intelligence Unit.

“China's post-Covid rebound has been swift and swift, but it has been largely self-sufficient and the rest of the world hasn't felt it,” he said.

Government officials have repeatedly warned of a “serious” and “complex” external environment in the face of growing risks for many of China's major trading partners.

Last month's sharp decline in trade flows will only renew concerns about external demand conditions and the risks posed to the domestic economy, especially given the weak recovery from a year ago when China's COVID-19 restrictions hit inbound and Outbound shipments were severely disrupted.

“Given the gloomy outlook for external demand, we expect exports to decline further later this year,” Zichun Huang, China economist at Capital Economics, said in a note.

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The data appeared to lower Hong Kong and mainland Chinese stocks, although global factors were also at play. Hong Kong's Hang Seng index was down 1.11% in the afternoon after climbing 0.5% before the lunch break, while China's blue chip CSI300 index was 0.26% weaker.

Sharp decline in China's April imports,

import stress

The drop in imports suggests that the world economy will be able to rely less heavily on China's domestic engine of growth, and as the nation -exports some of its imports, it may also show the extent of weakness in some of its major trading partner economies. strengthens. ,

The 15.3% drop in semiconductors imports reflects the scale of the demand-pullback in the re-export market for such components.

Analysts say the rapid global monetary policy tightening drive of the last 12-18 months and recent Western banking tensions remain concerns for revival prospects in China and around the world.

Shipment growth for ASEAN – a bloc of Southeast Asian countries – slowed to 4.5% in April from 35.4% the previous month. The region is China's largest export partner.

Other recent data also showed South Korean exports to China, a indicator of China's imports, were down 26.5% in April, continuing a 10-month straight decline.

China's coal imports fell in April from a 15-month high the previous month, pulled back as demand weakened in the Asian giant. Imports of copper – a proxy for global growth – and natural gas were also down over the same period.

The recent official Manufacturing Purchasing Managers' Index for April showed a sharp contraction in new export orders, underscoring the challenge facing Chinese policymakers and businesses, who are hoping for a strong post-Covid economic recovery.

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China's first-quarter GDP data last month also raised doubts about the demand outlook due to weakness in property markets, falling prices and a rise in bank savings, while providing some relief.

The government, which has pushed forward a series of policy support measures, is aiming for a modest GDP growth target of around 5% for this year, after narrowly missing the 2022 target.

“The global economy is deteriorating and this will weaken China's manufacturing sector,” said Iris Pang, chief China economist at ING.

“It is looking more likely that, in response, the government will steps to support the manufacturing sector labor market through fiscal stimulus.”

(Reporting by Joe Cash; Editing by Mr Navaratnam)