China exports take deepest plunge since 2020

Sales of Chinese products to foreign markets in July sank year-on-year by 14.5%, according to official customs data released Tuesday. The slump is adding pressure on China's leadership to provide stimulus as the world's second-largest economy tries to get back on track.

The July 2023 export data is the steepest drop since the 17.2% plunge that was reported in January-February of 2020, when the economy came to standstill at the onset of the COVID-19 pandemic.

At the end of last year, after officials removed growth-killing zero-COVID measures, China experienced a brief economic boost. 

However, the latest trade figures indicate how China's post-COVID recovery has run out of steam.

Shrinking global demand 

Chinese exports have been in constant decline since October, apart from a brief rebound in March and April. In June, exports also heavily declined, dropping by over 12% year-on-year. 

The weakened international demand for Chinese goods can be attributed to the threat of recession in the United States and Europe, combined with persistent high inflation.

Exports to the top destination for Chinese goods, the US, dropped by over 23% year-on-year in July, the customs data showed.

Shipments to the EU fell by more than 20% year-on-year, amid tensions over chip technology and "de-risking" from China.

Meanwhile, imports into China shrunk by 12.4% in July for the ninth straight month, in a sign that domestic demand has sharply tumbled.

"The weak trade figures highlighted the sluggish external demand, while [importers] refrained from purchasing goods for domestic production and investment," Ken Cheung Kin Tai, an analyst at Mizuho Bank, told AFP news agency. 

China tries to stimulate economy 

The world's second-largest economy reported  growth of only 0.8% in the second quarter of 2023, adding pressure on Chinese leaders to shore up business and consumer activity.

Last month, China's State Council released a 20-point plan to increase consumer consumption overall.

Specifically, the plan seeks to boost consumption in the sectors of housing, culture and tourism, while also encouraging people to buy electric vehicles.

The central bank in recent weeks cut several interest rates in the hope of reviving the economy.

However, the ruling Communist Party is yet to announce any large-scale stimulus spending or tax cuts.

Meanwhile, youth unemployment has touched a record high of more than 20%.

China's property sector is also feeling the weight of the sluggish economy as developers are failing to complete housing projects triggering protests and mortgage boycotts from buyers.

China's Politburo has promised change but warned that it now faces "new difficulties and challenges" as well as "hidden dangers in key areas."

Beijing is hoping for a 5% growth this year — one of the lowest targets set by the country in decades.

ns/wmr (AFP, AP, Reuters)