China's exports decline 7.5% in March, imports also fall as demand slows

China's exports contracted in March after growing in the first two months of the year, underscoring the uneven nature of the country's recovery from the pandemic.

Customs data released Friday show exports declined 7.5 per cent in March from a year earlier, while imports slipped 1.9 per cent. Both figures fell short of estimates.

In the January-February period, exports rose 7.1 per cent year-on-year while imports climbed 3.5 per cent.

China, the world's second-largest economy, posted a trade surplus of USD 58.55 billion in March. The surplus in the first two months of the year was USD 125 billion.

The decline in exports partly reflected a higher base of comparison with March 2023, when exports jumped 14.8 per cent as the economy reopened after languishing under strict Covid-19 controls.

The economy has slowed partly due to a crisis in the property industry brought on by a crackdown on excessive borrowing. Weakness in exports would be a further drag on growth.
 

We think export volumes will rise more slowly this year, given that consumer spending in advanced economies is cooling and the tailwind from last years sharp drop in export prices is fading, Zichun Huang, a China economist at Capital Economics, said in a note.

But she said imports would probably gain momentum as higher government spending boosts demand.

An official survey of factory purchasing managers in March showed manufacturing activity expanding for the first time in six months. The survey showed an expansion in new export orders for the first time in nearly a year.

China has set a target of around 5 per cent for economic growth this year, an ambition that will require more policy support, economists say.

The latest data belie worries that China might ramp up its exports to help meet its growth target. Surging shipments of electric vehicles to Europe have raised alarm over whether Chinese-made EVs might crowd out those made by local manufacturers.

Exporters have been slashing prices to increase their sales abroad, but with losses mounting, the ability of manufacturers to cut prices is shrinking, Huang said.