China’s export growth slowed in July, with some experts suggesting weaknesses are emerging in its strategy to use international sales to fuel national growth.
Figures released today (7 August) by China’s General Administration of Customs showed July exports rose 7% in year-on-year in dollar terms, a drop from June’s 8.6% rise.
Import uptick?
However, the report also suggested that business confidence is still high as imports – led by machinery and capital goods – rose sharply. Imports overall jumped 7.2% in July, compared to June’s 2.3% decline.
ING economist Lynn Song suggested high-tech imports also reflected an attempt to upgrade the country’s industries:
“There’s quite a lot of demand for high tech imports, semiconductors as well as automatic data processing equipment.”
Dip in oil
However, Reuters noted a dip in procurement of other key inputs, such as oil. China’s official data released today reveal it purchased 9.97m barrels per day in July, reflecting the lowest figures since September 2022 when it was still operating strict zero-covid restrictions.
Other critical imports such as iron ore and unwrought copper appeared to have held steady in terms of monthly values but daily rates suggest weakening demands.
Export boom busts
Louise Loo, an economist at Oxford Economics, told the FT:
“The problem is that the external demand story has never been, in our view, a permanent driver, it was always going to fade”.
She suggested that China had pushed exports significantly at the beginning of the year in anticipation of incoming tariffs on electric vehicles (EV).
The US imposed 100% tariffs on Chinese EVs in May, with the EU following suit in June with a more tentative maximum 38% tariff.
Domestic pain
These external factors reflect a weakness in China’s strategy to accelerate exports to compensate for flagging internal demand, which shows no signs of abating.
An overheating property market is now cooling, with falling prices and vast numbers of apartment blocks standing empty. Beijing unveiled a rescue package in May, which included instruction to local government to buy property from struggling developers.
Slumping demand is also evident in consumer markets, which that have seen vast deflationary pressure at a time when much of the developed world has wrestled with rocketing inflation.