Chinese economy’s export pillar shows cracks from global slowdown

Exports – the last reliable pillar of the world’s second-largest economy as it struggled with the pandemic, weak consumption and a property crisis – are indicating hard times ahead in China as softer overseas markets force exporters to shed workers, shift to lower-value goods and even rent out their factories.

Alarm bells sounded for China’s $18 trillion economy when trade data last week showed export growth well short of expectations and slowing for the first time in four months.

Those alarms are echoing in workshops across eastern and southern China’s manufacturing hubs, in industries from machinery parts and textiles to high-tech home appliances, where businesses are scaling back while export orders dry up.

Exports are vital to China more than ever, with all other pillars of its economy on shaky ground. Nie Wen, a Shanghai-based economist at Hwabao Trust, estimates exports will account for 30-40% of China’s GDP growth this year, up from 20% last year, even as outbound shipments slow.

“We had no export orders in the first eight months at all,” said Yang Bingben, 35, whose company makes industrial-use valves in eastern China’s export and manufacturing hub of Wenzhou.

He sees little hope for the fourth quarter, typically his busiest season, and expects sales this year to drop 50-65% from last year, with the stalling domestic economy unable to take up any slack from the slump in exports.

To support the sector, export tax rebates have been expanded, and a cabinet meeting chaired by Premier Li Keqiang on Tuesday pledged support for exporters and importers to secure orders, expand markets and improve the efficiency of port operations and logistics.

Please find below which were China’s five most exported products to Brazil by percentage share in 2022 from January to July 2022. The data is from DataLiner.

Brazil’s Top 5 Imports from China | Jan – Jul | 2022 | TEUS

Source: DataLiner (click here to request a demo)

Reliance on exports

China over the years has moved to ease its economy’s reliance on exports for growth, and reduce its exposure to global factors beyond its control, while some low-cost manufacturing has been shifting to other countries such as Vietnam as China grows richer and its costs rise.

In the five years before the pandemic, from 2014 to 2019, the share of exports in China’s GDP shrank to 18.4% from 23.5%, according to World Bank figures.

But that share edged back up with the emergence of COVID-19, reaching 20% last year, in part as locked-down, home-bound consumers worldwide snapped up China’s electronics and household goods. That also helped to buoy China’s overall economic growth.

The pandemic has come back to bite China this year, however. Its strict efforts to contain domestic COVID outbreaks led to lockdowns that disrupted supply chains and shipping.

But much more ominous for exporters, they say, has been the slowdown in overseas demand, as the pandemic’s fallout and the Ukraine conflict fuel inflation and tighter monetary policies that are depressing global growth.

These retrenchments put further pressure on policymakers searching for new sources of growth in an economy burdened by a year-long property slump and disruptions from Beijing’s zero-COVID policy.

Chinese companies involved in exporting and importing goods and services employ one-fifth of China’s workforce, supplying 180 million jobs.

Some exporters are adjusting their operations in response to the slump by producing cheaper goods, but this too will eat into revenue.

Miao Yujie, who runs an export company in eastern China’s Hangzhou, said he has started to use cheaper raw materials and to produce lower-value electronics goods and clothing that would appeal to inflation-wary, price-conscious consumers.

“There will be a big drop in exports in the second half of the year,” Miao said.

Source: Reuters

To read the full original article, please go to: https://www.reuters.com/world/china/chinese-economys-export-pillar-shows-cracks-global-slowdown-2022-09-15/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=daily-briefing&utm_term=09-15-2022

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