China's economy is still struggling to recover from the pandemic

China’s economy is still struggling to recover from the pandemic

Exports to the world’s second-largest economy fell 3.3 percent to US dollars last month compared to a year ago, according to customs figures released this weekend, reversing a 3.5 percent increase in April.

Analysts attributed the downturn to weak demand abroad: While China began reopening its economy months ago, many other global powers have only begun to lift some measures in recent weeks.

Recovery at home was not entirely smooth for China either. Imports last month fell 16.7 percent to US dollars a year ago – the deepest contraction since January 2016 – suggesting domestic demand remains sluggish.

“Import data show a weaker domestic economic trend after the opening than it feared, even as China begins to increase infrastructure spending,” wrote Mitul Kotecha, a senior emerging market strategist at TD Securities, in a research paper. Monday’s note.

China – which has struggled to slow the economy before the virus – has been trying to get through the recession. The country promised last month to throw 3.6 trillion yuan ($ 500 billion) in its economy this year in tax cuts, infrastructure projects and other stimulus measures as part of an effort to create 9 million jobs and mitigate the impact of the pandemic.

And there are at least some signs of a recovery in demand, encouraged by more generous cash distributions. Passenger car sales rose for the first time in 11 months in May, according to data released on Monday by China’s Passenger Car Association. The country sold 1.6 million new passenger cars last month, up 1.8% from a year earlier.

However, trade is still a sensitive point for China, which manages an escalation of tensions with the United States. Mutual responsibility for the pandemic has upset relations between the world’s most important economic superpowers, which could jeopardize their fragile trade truce.

Data for May showed a record trade surplus of $ 62.9 billion, according to Koecha of TD Securities. President Donald Trump has often criticized China for its huge trade surplus with the United States.

However, Capital Economics economists expect Chinese exports to continue to weaken in the short term, before stabilizing later this year.

They wrote in a research note on Monday that they expect the contraction in global growth “to fall below this quarter”, putting the ground under exports until the back half of 2020.

Capital Economics economists also expect China’s stimulus measures to “lead to a strong recovery in imports.”

Leave a Reply

Your email address will not be published. Required fields are marked *