On Thursday, customs data revealed an increase in China’s imports and exports in April, following a decline in March. This uptick suggests a promising boost in both domestic and international demand, bolstering the country’s fragile economic recovery.
The data indicates that a flurry of policy assistance initiatives implemented over the previous several months is gathering momentum and stabilizing the already shaky confidence of consumers and investors.
Shipments from China increased 1.5% year over year last month, as predicted by economists surveyed by Reuters. In March, they experienced a 7.5% decline, the first since November.
April’s import growth was 8.4%, above the forecast 4.8% increase and reversing March’s 1.9% decline.
“Exports have been the bright spot in China’s economy so far this year. The weak domestic demand led to deflationary pressure, which boosts China’s export competitiveness,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.
In March, figures on exports, consumer inflation, producer prices, and bank lending indicated a potential flagging momentum. However, China’s economy outpaced expectations with faster-than-anticipated growth in the first quarter. Long-term property crises are also not showing any signs of abating, which is leading to calls for additional policy stimulus.
Both imports and exports increased 1.5% year over year in the first quarter.
During the January–February period, the world’s second-largest economy appeared to overcome early obstacles, surpassing forecasts in a series of economic data. Additionally, a poll conducted in March among factory owners further illustrates this trend. This has given authorities further time to boost shaky investor confidence and revive growth.
Beijing, though, has its work cut out for it. Last month, rating agency Fitch downgraded China’s sovereign credit rating outlook to negative due to potential threats to state finances from slowing GDP and rising government debt.
Last month, the Communist Party’s top decision-making body, the Politburo, announced that it would increase its support for the economy. It will implement proactive fiscal policies and cautious monetary policies, including changes to interest rates and bank reserve requirements.
China has set a target of about 5% annual economic growth for 2024, which many observers believe will be difficult to meet without significant additional stimulus.
The majority of last year was difficult for Chinese exporters as rising interest rates affected foreign demand. Manufacturers may face increased pressure as they compete for market share. The Federal Reserve and other developed countries are not showing any urgency to lower borrowing costs.
According to analysts, Chinese exporters are still lowering their prices in order to keep their sales overseas in spite of the poor state of local demand.
“Overcapacity in many industries will continue to depress export prices in the coming months,” said Dan Wang, chief economist at Hang Seng Bank China.
“As more Chinese companies make investments overseas to get around potential sanctions from the U.S., we expect more exports of industrial inputs like chemicals, fabric, auto parts and electric machineries,” she stated.
In contrast to the poll’s $77.50 billion prediction and $58.55 billion estimate from March, China’s trade surplus increased to $72.35 billion.
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