China’s exports, the largest driver of the country’s GDP, declined in July. Just another problem for the hailing Chinese economy.
For the first time this year, China missed expectations for its exports in July as foreign tariffs go into effect. On the other hand, imports in the world’s second-largest economy reached a 3-month high, beating economists’ expectations.
July exports from China grew 7% year-on-year, far below the forecast of 9.7%. The figure is also lower than in June when exports grew 8.6%, more than expected.
Imports grew at a faster pace than exports at 7.2%, far outpacing expectations for a 3.5% rise and rebounding the 2.3% decline in June.
The import rush was likely due to increasing chip imports ahead of new US restrictions on semiconductor trade across the Pacific. The Biden administration tried to prevent China from getting access to cutting-edge semiconductors, imposing increasingly strict restrictions after 2021.
China is the world’s largest importer of crude oil, mostly from Persian Gulf countries and Russia. In July, Beijing’s crude imports were at the lowest levels since September 2022, contributing to a global fall in oil prices. Brent, oil’s global benchmark, reached $78.6 per barrel on Wednesday, down from $87.7 at the beginning of July.
High imports should therefore not be an indication of rebounding Chinese consumer demand, which remains at its lowest pace in years. The Chinese economy is battling deflation and a major real estate crisis, depressing internal demand and industrial production.
Government stimulus
Exports were the only remaining economic factor contributing to high GDP growth in China. In the second quarter of 2024, Beijing reported a 4.7% GDP growth, lower than expected. The government self-imposed a 5% GDP growth goal this year, an objective many economists consider too ambitious.
The real estate market crisis collapsed some of the country’s main property developers and some of China’s largest companies. The real estate market amounts to roughly 25% of China’s GDP.
“Due to base effect, China’s exports may keep a single-digit growth in the near future, but considering the slowing external demand and tariffs, the outbound shipments in the second half of 2024 will face bigger pressure,” Lynn Song, chief economist for Greater China at ING, said.
Last month, the Chinese government started rolling out measures to stimulate the economy. Beijing announced a 1 trillion yuan ($140 billion) debt issuance program, 150 billion yuan of which will subsidize replacements of old appliances, cars, and other consumer goods.
Other measures will be rolled out in cycles throughout 2024 according to the economy’s needs, government officials said.
