BEIJING- China’s export growth is expected to have slowed to a crawl in April as strict COVID-19 curbs hit production while imports likely extended declines, creating heavy headwinds for the world’s second-largest economy in the second quarter.
The trade sector, which accounts for about a third of gross domestic product and employed 180 million people in 2020, is losing momentum as widening anti-virus curbs ensnared supply chains.
Exports likely grew 3.2 percent from a year earlier, according to a median forecast in a Reuters poll of 18 economists, slowing sharply from a 14.7 percent gain in March. The forecast is the slowest growth since June 2020.
The uncertainty over the Ukraine war and recovering production capacity overseas also squeezed China’s share of global trade. The new export orders component of the official manufacturing purchasing managers’ index hit a two-year low in April.
Imports were expected to have fallen 3 percent year-on-year in April, the poll showed, worsening from a 0.1 percent fall in March and marking the steepest decline since May 2020.
Sixteen economists in the poll forecast a $50.65 billion trade surplus in April, wider than the $47.38 billion in March, mostly due to the decline in imports.
Analysts at Goldman Sachs said in a note on Friday that COVID related restrictions disrupted domestic supply chains and port operations in the month. Trading partners such as South Korea reported weaker trade data with China.
Data from the China Port Association showed throughput of foreign goods at eight major container ports in China declined 4.1 percent year-on-year in the April 11-20 period.
Premier Li Keqiang this week urged support for production, logistics and employment at key trade firms.
However, investors and markets want even more support as the country’s leaders urge citizens to stick with the dynamic zero-COVID policy.
Chinese capital Beijing is reporting dozens of daily infections while Shanghai said on Friday it has brought the virus under control following a month-long lockdown of nearly 25 million people. Elsewhere, some Chinese cities now require PCR test results from people in order to enter public places.
Nomura analysts estimate that it would cost 1.8 percent of China’s GDP if 70 percent of the 814 million population came under a 48-hour testing mandate.
China’s imports unexpectedly fell in March as COVID-19 curbs across large parts of the country hampered freight arrivals and weakened domestic demand, while export growth slowed, prompting analysts to expect a worsening in trade in the second quarter.
The softer trade figures are likely to reinforce expectations of more policy support from the government, with an adviser on Wednesday calling for cuts in banks’ reserve requirements and interest rates to boost a flagging economy.
Inbound shipments fell 0.1 percent in March from a year earlier, marking the first decline since August 2020, customs data showed on Wednesday. That compared with a 15.5 percent gain in the first two months of the year and an 8 percent increase forecast by analysts in a Reuters poll.
The decline was broad-based. China’s imports of crude oil tumbled 14 percent in March and gas import volumes were the lowest since October 2020. Purchases of copper fell 8.8 percent, as COVID outbreaks hurt manufacturing and industrial demand for some raw materials remained soft.
Exports – a major driver of the economy – rose 14.7 percent in March, beating analyst expectations for a 13 percent rise, although slowing from a 16.3 percent gain in January-February.
“Due to the severe disruptions in factory operations, road transport and port congestion as a result of the worst COVID-19 wave and the most severe lockdowns since spring 2020, we expect export growth in dollar terms to slump to 0.0 percent year-on-year in April, while import growth is likely to drop further to minus 3.0 percent,” Nomura said in a note.
Many analysts expect trade conditions to worsen in April, on slower customs clearance and as the impact from a lockdown in Shanghai is felt.
China’s efforts to curb its largest COVID-19 outbreaks in two years have restricted activity in several cities including Shanghai and forced companies from Apple supplier Foxconn to automakers Toyota and Volkswagen to suspend some operations.
That likely reduced demand for imported raw materials for Chinese factories, according to Zheng Houcheng, director of the Yingda Securities Research Institute.
“The pressure on the global economy is likely to drive down commodity prices over the medium-term, which would hit China’s exports, in both volume and value, in the second half,” said Zheng.
China’s strong trade performance seen over the past two years is set to slow this year as other countries emerge from COVID lockdowns and higher energy prices and global logistics disruptions caused by Russia’s war in Ukraine squeeze exporters.
