Chinese exports tumbled more than expected in June, putting fresh pressure on Beijing to unveil more stimulus measures to kickstart the flagging recovery. Overseas shipments are a vital pillar of growth in the world’s second-largest economy, but apart from a brief rebound in March and April, they have declined since October owing to weak demand in key markets. The 12.4% drop released by the General Administration of Customs was an acceleration from May and worse than the 10 percent forecast in a poll of economists conducted by Bloomberg.
The data underscores the extent to which China suffers from a global economic slowdown that has sparked capital flight, frozen the flow of funds into its stock markets, and left it grappling with the risk of widespread credit defaults. It also highlights how Beijing’s policies still need to spark a strong enough recovery in consumer spending and property investment to help drive the economy forward.
Even if China can revive its domestic demand, it cannot offset the weakness in many other countries and regions worldwide that are highly dependent on its manufacturing and exports. Numerous countries with significant exposure to China’s economy — from Australia to South Korea and several African nations — are already seeing their growth rates slow due to a weakening demand for Chinese goods and services.
The slump in overseas shipments has been driven by a sharp slowdown in demand in China’s main export markets of the United States and Europe. A slump in commodity prices has compounded it, as iron ore and oil prices have fallen significantly. In addition, the impact of the COVID-19 pandemic has led to a surge in social distancing that has hit catering and retail businesses, further squeezing demand for Chinese goods.
The government has been releasing cash into the economy to support domestic demand through cuts in bank reserve requirements and a stimulus plan targeting infrastructure and household consumption. But a further cut in bank reserve requirements this week and the continuing deceleration in investment spending suggest that additional stimulus measures are likely to be needed soon.
Economists agree that more short-term monetary easing is needed to keep the country’s financial system afloat, as it continues to be overburdened with debt. But they warn that such a move will only do a little to solve China’s long-term challenges, including the need for structural reforms and to deal with rapid aging and rising healthcare costs. This story is part of CNN’s ongoing coverage of China, a significant economic powerhouse with an increasingly influential role in the global arena. Check back for our weekly updates on what you need to know about the world’s second-largest country. Sign up for our free newsletter, Meanwhile in China, here. And follow us on Facebook and Twitter. Copyright 2022 CNN. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
