Explainer | China trade: 5 takeaways from March data as exports tumbled, but ‘reasonable story about external demand’ appears
- China’s exports fell by 7.5 per cent in March compared to a year earlier due to a higher base of comparison
- Imports also fell short of expectations and declined by 1.9 per cent year on year compared to the same period last year
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1. Exports tumble in March, but first quarter shows a ‘reasonable story about external demand’
“This was mostly due to a higher base for comparison export values, [which] surged 10.9 per cent year on year in March last year. After accounting for changes in export prices and for seasonality, we estimate that export volumes rose to a fresh high,” said analysts at Capital Economics.
“We doubt shipments can keep rising this quickly, however. The gains over the past year have been at least partly driven by exporters slashing prices. But with the loss-making share of manufacturing firms climbing to record highs, their ability to cut prices has diminished and export prices have stabilised recently.
“The ongoing trade-weighted appreciation of the [yuan] will also serve as a headwind.”
Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, pointed to the fact this March had two fewer working days compared to the same month last year, while the first two months of this year had two more working days than the same period last year, as “export growth slowed more in March”.
China’s exports tumble by 7.5% in March, but overseas demand set to rebound
“The working day effect distorts the picture, as it often does in the first quarter due to Chinese holidays. This year is a leap year which further complicates the data,” he said.
But Zhang added export growth of 1.5 per cent in the first three months of the year, rebounding from a contraction of 1.2 per cent in the previous quarter, showed a “reasonable story about external demand”.
2. Imports fall, but rebound expected
China’s imports dropped by a worse than expected 1.9 per cent from a year earlier in March, in contrast to 3.5 per cent growth in the first two months of the year.
“A higher base for comparison also played a role, but imports edged down in volume terms,” added analysts at Capital Economics.
“We expect imports to rebound in the coming months, however, as fiscal stimulus is likely to continue supporting construction activity and demand for industrial commodities.”
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3. Trade balance falls to US$58.6 billion
China’s trade surplus stood at US$58.6 billion in March, compared with US$125.1 billion in the first two months of the year.
4. Exports to trade partners fall
China’s exports to the United States in March dropped by almost 16 per cent year on year, compared to a 5 per cent increase in the first two months of the year.
Shipments to Russia declined by 15.67 per cent, compared to a 12.5 per cent growth in combined figures for January and February, while exports to the European Union decreased by 14.95 per cent last month.
China’s shipments to the Association of Southeast Asian Nations – its largest trading partner – dropped by 6.25 per cent last month compared to a year earlier.
China had seen a significant expansion in trade with the 10-nation bloc last year, with shipments having surged by 35.43 per cent.
5. What’s next for China’s trade?
Analysts at Capital Economics expect export volumes to rise more slowly this year as “consumer spending in advanced economies is cooling and the tailwind from last year’s sharp drop in export prices is fading”.
“Import volumes edged down last month, but they will probably rebound in the coming months thanks to fiscal support boosting commodities demand,” they added.
