Both mainland imports and exports show seemingly precipitous double-digit percentage drops. Is this just a post-Covid blip - or is decoupling starting to have an impact? finews.asia takes a look.
The figures that came in from China’s customs office on Tuesday were stark. Exports in July were down 14.5 percent while imports fell 12.4 percent. Moreover, it is the third consecutive time that both sides of the country’s trade balance declined. To add insult to injury, the numbers come on the heel of a double-digit drop in exports for June.
So what is going on? As with most countries, trade figures fluctuate significantly. In 2016 and 2018, for example, on the cusp of the brave new era of Trump-attempted geopolitical containment, monthly exports were down by more than a quarter in one month, only to rise by almost half (44.5 percent) in another.
Inconclusive Signs
The question on many minds, particularly those who are not that close to the figures, is whether we are seeing the beginning of a great de-risking or decoupling exercise that many finance ministers and heads of state in the G-7 have been calling for - something that finews.asia has previously commented on. The truth is that the signs remain inconclusive at best.
According to an article in the «South China Morning Post» (registration required, eventual paywall), shipments to the Association of Southeast Asian Nations (ASEAN), the mainland’s largest trading partner, were down 21 percent, which was sharper than the 20 percent fall seen in exports to the European Union.
Ardent Proponents
Focusing on just the two blocs might prompt one to believe that it was solely economic factors driving the decline rather than political or geopolitical considerations.
The US, however, came in with a 23 percent drop, which could lead many to believe that it was actually geopolitics starting to work, given much of North America (i.e., the US and Canada and not Mexico) have been ardent proponents of decoupling.
Large Trade Surplus
Still, as the «SCMP» indicates, China continues to run a large trade surplus and one that apparently grew $10 billion in July. The newspaper also cited analysts saying that much of the decline reflected lower prices given volumes remained far above levels seen before the pandemic. By that very concrete token, there is not much decoupling going on yet.
«Xinhua», the Chinese news agency, for its part emphasized cumulative figures that show a slight gain in exports for the first seven months of the year, with imports up by 1.5 percent, set against a 1.1 percent decline in imports.
Overall Gain
What all the figures show clearly, however, is that a soft domestic economy is hampering imports substantially both from a monthly and year-to-date perspective.
As finews.asia commented on Monday, the post-Covid economy recovery may really be sputtering more than expected.
Slew of Measures
In one day, the country significantly relaxed key visa restrictions, scrapped tariffs on Australian barley, and announced a slew of other measures.
As we indicated then, more time is needed to figure out what is actually going on. But the evidence, at least right now, increasingly points to the mainland’s economic stewards being caught off guard by the depth and extent of the slowdown in domestic demand.
