Agencies
China’s export growth beat expectations in April, with analysts pointing to “green shoots” in the recovery of global demand, which could help provide a solid base for Beijing to achieve its annual economic growth target.
But analysts also cautioned that uncertain external trade frictions mean sustaining the momentum in domestic demand remains “the key focus” to hitting the “around 5 per cent” gross domestic product growth goal for 2024.
Exports last month rose by 1.5 per cent from a year earlier to US$292.5 billion, according to customs data released on Thursday, marking a significant turnaround from the 7.5 per cent decline in March.
Imports, meanwhile, also surged and rose by 8.4 per cent from a year earlier last month, compared to a 1.9 per cent fall in March.
“China’s exports still show resilience after excluding base factors, and the country’s economy is being supported by trade due to the rise of overseas economies, especially the US, ” said Larry Hu, chief China economist at Macquarie Capital.Hu expects the favourable export performance to persist for at least the next six months, with growth in 2024 set to stay around 5 per cent.
“On the export side, the revival back to positive growth may be in part reflecting some of the green shoots we have been seeing in global demand,” said analysts at HSBC.
Imports also benefited from last year’s lower base, higher commodity prices and ongoing fiscal support, they added.
“We think domestic demand will still be the key driver for growth this year. Ongoing resilience in consumption and policy easing, such as for upgrading and for property demand, should help put growth on track towards the ‘around 5 per cent’ target this year,” said the analysts at HSBC.Beijing is eager for exports to provide a boost to trade-led economic growth this year as it seeks to hedge against domestic headwinds, including the ongoing property slump and sluggish household spending.
However, the European Union’s ongoing anti-subsidy investigation into China’s electric vehicles, along with US accusations of overcapacity issues, are casting a shadow over China’s export prospects.
“There are bright signs in China’s exports as overseas demand continues to rise, especially for automobiles and semiconductors, while the rising imports can last at least two months,” said Ding Shuang, chief Greater China economist at Standard Chartered Bank.
“China has a high share of overseas markets for both labour-intensive and hi-tech products, and once this ratio goes up by even a percentage point, it will increase the chance for Beijing to face more trade frictions from the West.”
China’s car exports surged by 28.8 per cent year on year last month, while shipments of hi-tech products increased by 3.1 per cent in April and exports of integrated circuits increased by 17.8 per cent during the same period.
But China should, Ding added, reduce its reliance on exports due to the uncontrollable frictions, although the sector would still provide support for China to meet this year’s growth target.
“This summer will be a crucial point for China to see how much trade restriction it will face, as the EU is set to announce the investigation result,” he added.
“China is equally a huge but more controllable market. Once timely actions ease the property slump, households will draw on their excess savings as their incomes and consumption confidence will stabilise.”
Elsewhere, China’s trade surplus stood at US$72.4 billion in April, compared with US$58.6 billion in March.
“On a positive note, China enjoys the tailwinds of the global tech cycle recovery and plays a leading role in products related to green transition. This means that exports will be a solid driver for economic growth in 2024,” said Gary Ng, a senior economist at Natixis Hong Kong.
“However, the big swing in year-on-year import growth is largely driven by a base effect and the amount is smaller than in March.
“The challenge of boosting consumer and corporate confidence will remain the most immediate problem.”Analysts at Capital Economics, though, expect China’s export volumes to retreat over the coming months due to cooling consumer spending in advanced economies and diminishing tailwinds from lower export prices.
“Overcapacity has pushed down export prices and fuelled the recent strength in exports. But with manufacturers’ profit margins already squeezed, their ability to slash prices has diminished and export prices are now bottoming out,” they said.
Within April’s export data, China’s shipments to the US dropped by 2.8 per cent year on year, while its exports to the European Union fell by 3.57 per cent.
Exports to Russia also fell by 13.56 per cent year on year in April, continuing the double-digit fall seen last month.
However, shipments to the Association of Southeast Asian Nations (Asean) rose by 8.15 per cent.And China’s trade still faces geopolitical uncertainties, added Hu at Macquarie Capital, but this would not alter the overall volume of its exports.
Instead, the change would manifest in the destinations of its exports, with a notable uptick observed last year in shipments to the Asean bloc and Mexico, Hu said.
“The final destination for most of these products (in the Asean) is still the US,” Hu added.
China’s exports tumbled last year as overseas demand slumped, and it saw its first overall growth decline in seven years, as shipments fell by 4.6 per cent.
However, international bodies expect a more promising trade outlook this year.
The Organisation for Economic Cooperation and Development said last week that the growth of global trade in goods and services could expand to 2.3 per cent this year and 3.3 per cent in 2025 from last year’s 1 per cent growth.
“[Chinese] exports will pick up again as global demand recovers, and an increasing number of Chinese goods become competitive in international markets,” it said.
