China’s exports pick up, increased pressure for incentives

Exports in January and February rose 16.3% in dollar terms to $544.7 billion from a year earlier, according to data from the General Administration of Customs. While 15% beat profit expectations among economists surveyed by The Wall Street Journal, it still marked a slowdown from 20.9% year-over-year growth in December.

Imports rose 15.5% year over year to $428.7 billion, down from December’s 19.5% increase and in line with the 15.4% projected by a survey of economists.

While China bought small amounts of energy, including coal, natural gas and crude oil, prices of those commodities have risen and Russia’s invasion of Ukraine could increase the risk of supply disruptions.

Economists estimate that China’s trade surplus, which swelled to $676 billion last year and has driven the country’s rapid recovery from the pandemic since 2020, will provide less support for its overall economy this year.

“It is almost impossible for China to replicate such a strong export momentum this year,” said Shuang Ding, chief economist for China and North Asia at Standard Chartered Bank.

Mr Ding said the country’s trade surplus would shrink to about $480 billion this year as export growth slows and prices of commodities such as grain and energy rise.

Economists say factors putting pressure on export growth include a gradual reopening of other countries, reducing their reliance on China’s supply chains and the imminent rate hike expected by the US Federal Reserve. It would destroy the spending power of consumers in the West, whose appetite for commodities including furniture and consumer electronics has fueled Asia’s strong exports since the start of the pandemic.

Global trade growth is expected to slow through the first quarter of 2022, after reaching a record $28.5 trillion after expanding by 25% last year, according to forecasts from the United Nations Conference on Trade, as more countries start their business. The pandemic has driven stimulus packages. and development.

A war in Ukraine could exacerbate supply-chain bottlenecks and affect global recovery. This could be affected in particular economies in the European Union, which is China’s second largest trading partner. Standard Chartered recently lowered its forecast for the region’s economic growth in 2022 from 4% to 3.1%.

Any slowdown in the EU would dent global goods demand and negatively impact China’s export-market outlook, said Larry Hu, chief China economist at Macquarie Group, which he said was significantly lower than last year’s 30. We predict year-on-year growth in exports at a slower pace. % at a “high single digit” rate this year.

China’s weak trade momentum put pressure on Beijing to boost domestic demand and hit this year’s growth target.

On Saturday, the government set a growth target of around 5.5% for this year, an ambitious target that paves the way for more aggressive financial and monetary support as the country continues to deal with headwinds in the domestic economy, including asset collapse and sluggishness. recovery is included. in consumption.

“With the Ukraine crisis at risk of a collapse in global demand, China will have to rely more on domestic demand in 2022,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, wrote in a note on Monday. “Now the pressure is on fiscal policy to deliver.”