China's Exports Show Signs of Recovery, but Economic Slump Persists
China's exports rebounded in September, ending a six-month decline, while imports slightly decreased This positive shift in the world's second largest economy indicates a promising recovery
Don't miss out on CNN's Meanwhile in China newsletter, diving into the country's growth and its global influence. China's exports have risen for the first time since April, with imports seeing a slight decline, according to data from the world's second largest economy.
Exports in US dollar terms increased by 0.5% in November compared to the previous year, bouncing back from a 6.4% decline in October, according to the General Administration of Customs. Prior to this improvement, exports had experienced six consecutive months of decrease due to weakened global demand.
The unexpected rise in November can be attributed in part to seasonal factors, as exports typically strengthen leading up to the year-end holiday season. Additionally, disruptions in global trade caused by the spread of Covid-19 infections in November of the previous year contributed to higher headline numbers for this year.
Ken Cheung, the chief Asian foreign exchange strategist at Mizuho Bank, stated that the rebound in China's export growth is a positive indicator for the country's recovery. However, it remains uncertain if this momentum can be maintained, particularly with the unexpected decline in imports in November, which suggests weak domestic demand.
US dollar imports declined by 0.6% last month, following a 3% increase in October, as reported by customs data. This was lower than the 3.3% growth anticipated by analysts in a Reuters poll. The trend suggests that consumer spending is likely to continue to be weak, as evidenced by consumer prices returning to deflation in October for the second time this year. This reflects consumer caution in the midst of an economic slowdown.
Analysts also said the strength in exports is not sustainable.
A truck drives between containers at the port in Nanjing, Jiangsu province, in August.
Stringer/AFP/Getty Images
Analysts from Capital Economics anticipate that the current resilience of exports will not be sustained. They attribute the November growth to exporters lowering prices in order to increase market share, a strategy that they believe is not viable in the long term.
"Exports are unlikely to withstand the growth slowdown in China's major trading partners without the assistance of price reductions, which we anticipate will persist in the first half of next year," they included. Chinas exports dropped by 5.2% compared to a year ago in the first eleven months of 2023.
Shipments to the European Union decreased by 5.8% and to the United States by 8.5%. Analysts predict that the data will not show significant improvement in the upcoming months.
"The economies of Europe and the US are slowing down. In 2024, China will continue to rely on domestic demand as the primary growth driver," stated Zhiwei Zhang, president and chief economist of Pinpoint Asset Management.
China's export growth has surged despite a slew of economic challenges such as a weakened property market, mounting debt, and decreasing consumer prices. The World Bank and the International Monetary Fund have both revised down China's growth projections for the next year to 4.4% and 4.6%, respectively. In addition, Moodys has downgraded China's government credit rating and anticipates a slowdown in GDP growth to 4% in both 2024 and 2025.
