Exports cannot help China grow that much this year

BEIJING – The Chinese economy was supported by strong exports last year, but that boost is on the wane.

The country’s customs said on Tuesday that exports were up 30.6% in March from a year ago, while expectations for a growth of 35.5% turned out not to be.

Looking ahead to the next three months, customs spokesman Li Kuiwen told reporters that last year’s high base poses challenges for second-quarter trade. In addition, Li said the resurgence of Covid-19 cases and overseas uncertainties – such as the blockage of the Suez Canal – mean that China still has a long way to go to achieve stable trade growth.

The Chinese authorities want to ensure that the economy no longer depends on private consumption for growth and that it no longer produces goods for export. But the category still plays an important role in the economy as a whole. Last year, Chinese factories were able to resume production much earlier than those in other countries still grappling with the pandemic.

National exports rose 3.6% last year, while the country’s GDP grew 2.3% as the only major economy to grow during the pandemic. Much of last year’s export growth came from a surge in demand for face masks and other protective equipment.

China’s early emergence of the pandemic and stimulus measures abroad have spurred product purchases by Chinese factories, noted Larry Hu, China chief economist at Macquarie.

“These two factors (will) both disappear for the rest of this year as other countries reopen and consumers can spend more on services,” he said in an email Tuesday. “That’s why I don’t think the current pace can be sustained.”

The 30.6% increase in exports in March comes from a low point. Chinese exports fell 13.6% in the first quarter of last year on a 6.8% contraction in GDP, according to data accessible through Wind Information.

Nomura analysts expect export growth to slow to 10% to 15% in April, with a greater slowdown in the second half of the year.

Another sign of constraints on trade’s ability to contribute to national growth, cross-border e-commerce between China and other countries showed a weak performance in the first quarter.

The new Internet-driven trend contributed 419.5 billion yuan ($ 64.5 billion) to trade in the first three months of the year. That represented just under 5% of China’s trade at the time – little changed from the ratio of nearly 5.3% last year.

While the first quarter figures showed growth of 46.5% from a subdued base a year ago, the value of cross-border e-commerce trade in the first three months of the year was below the quarterly average of 422.5 billion yuan from last year.

“The share of cross-border e-commerce remains low, demonstrating the limitations it has to contribute to imports and exports and the economy as a whole,” said Bruce Pang, chief of macro and strategy research at China Renaissance. That’s according to a CNBC translation of his Chinese-language statement.

He expects the Chinese authorities to focus on increasing domestic demand and the local market as a way of hedging against possible fluctuations in foreign trade.

Imports rose by 38.1% more than expected in March.

China will publish first-quarter GDP figures on Friday. Data for January and February is typically skewed by the Spring Festival, the country’s biggest holiday of the year.