Exports from China declined much more than expected in March, worrying economists that Beijing’s crisis may be far from over.
China’s exports and imports declined far more than expected in March, raising doubts about the country’s promised 2024 economic recovery. On Friday, China also reported exports and imports for the first quarter of the year.
Exports in the Asian giant declined 7.5% in March, much lower than the 2.3% expected by Reuters-polled analysts. Imports also declined by 1.9%, while analysts were expecting a 1.4% rise.
China is the world’s largest exporter, meaning that such a steep decline entails consequences for the entire global economy. Last year, China also posted similarly worrying figures, but March’s decline is the highest since August 2023.
Economists and analysts were disappointed by China’s post-COVID recovery. Restrictions in the country were effectively raised in December 2022, and many believed 2023 would be a booming year for the Asian giant.
Not only was that not the case, but China was also hit by its worst real estate crisis in history and rampant deflation.
However, China surprised economists again in early 2024 with a recovery nobody expected. In the January-February period, China’s exports rose 7.1% with imports growing 3.5%; much more than forecast by Western observers.
January and February are usually China’s most vibrant economic months because of the Chinese New Year.
Waning growth
March’s exports now worry economists that Beijing’s goal of 5% GDP growth in 2024 is now out of reach. The real estate crisis continues with property giants Country Garden and Shimao facing liquidation. Likewise, deflation keeps worsening with the country’s central bank seemingly unable to do anything about it.
At the annual “Two Sessions” conference, China’s economic officials outlined plans for economic recovery. In the Communist Party (CCP)’s view, real estate is now a thing of the past and should be replaced by new markets. The real estate market amounts to almost 30% of China’s GDP.
The CCP believes three new products should replace real estate: solar panels, lithium-ion batteries, and electric vehicles. China is already the leading producer of each of these products, though far from its full potential.
Western officials already expressed concerns about China’s overproduction. They believe Beijing should switch to a service-based economy instead of flooding the world with other cheap products.
At the same time, Western countries fear losing competitiveness in these key sectors. Electric vehicles in particular will be the harshest battlefields, with the European and American car industries not ready to lose their spots.
The current level of Chinese exports, however, proves Western countries right.
