China’s Exports Still Growing Despite Global Inflation Fears

Port of Shanghai
File image

Published Aug 8, 2022 9:47 PM by The Maritime Executive

There has been immense interest in mapping out the impacts of the national lockdowns China imposed in the second quarter. However, going by new data released on Sunday by China’s General Administration of Customs (GAC), the nation appears to have shrugged off most of the predicted impacts on its economy.

Specifically, July has seen a significant recovery. Despite signs that global consumption would slow in July, outbound shipments grew by 18 percent, the fastest pace yet this year, compared to 17.9 percent rise recorded in June. This performance exceeded expectations of a 15 percent gain.

Analysts had pegged their outlook on results of a global manufacturing survey, which showed demand weakened in July with orders and output indices falling to their lowest levels since the onset of Covid-19. Another official China’s manufacturing survey corroborated the decline; showing industrial activity had contracted in June, resulting from widespread lockdowns in spring.

But the unexpected positive performance in July points to recovery of supply chains at China’s major export hubs. In addition, China’s special relief measures for small and medium-sized enterprises, including tax reductions, could have had some effect, according to trade researcher Bai Ming of the Chinese Academy of International Trade and Economic Cooperation.

The high export volume recorded in July is also reflected in increasing number of TEUs handled at Chinese ports. Foreign trade container throughput at eight of the Chinese major ports rose by 14.5 percent in July, compared to the 8.4 percent gain seen in June, according to data by the China Ports and Harbors Association.

“Amid negative real interest rate and surging inflation, July exports may have been buoyed by frontloaded orders by some European and US customers to ensure they had goods on hand with lower costs,” noted Bruce Pang, Chief Economist and head of research at Jones Lang Lasalle Inc.

Meanwhile, imports remain weak, suggesting a soft domestic demand in China. Imports rose by only 2.3 percent from a year earlier against the forecasted 3.7 percent rise.

For instance, crude oil imports in July fell by 9.5 percent from a year earlier while the volume of imported integrated circuits - a major Chinese import - dropped by 19.6 percent, according to Reuters’ calculations. The slow growth in import volumes will be visible in the last half of the year, as China’s imports are components of goods that are then re-exported.