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China exports fall as demand slows and lockdowns hit manufacturing


China’s exports significantly missed expectations in August, with the country’s trade surplus shrinking as overseas demand flattened and a new wave of Covid-19 restrictions at home disrupted production and logistics.

Exports rose 7.1 per cent last month compared with the same period a year earlier, well below consensus expectations of a 13 per cent increase and down from 18 per cent growth in July, official customs data showed on Wednesday. The fall represented the first slowdown since April.

The country’s trade balance narrowed to a $79.4bn surplus, compared with market expectations of $92.7bn, after reaching a record high of $101.3bn in July.

Trade had been a rare bright spot for the Chinese economy, which has been hammered by a liquidity crisis in the property sector and widespread lockdowns as part of President Xi Jinping’s zero-Covid strategy. Analysts said this month’s slowdown represented the beginning of the end of the export boom that had provided a lifeline to the world’s second-largest economy after the early stages of the pandemic in 2020.

“Export softness arrived earlier than expected, as recent shipping data suggests that demand from the US and EU has already slowed, as shipping prices have been falling significantly,” said Zhou Hao, chief economist at Guotai Junan International, a Hong Kong-based brokerage.

The downbeat data follows a fall in factory output in Europe and elsewhere in Asia, as high inflation and surging energy prices weigh on consumer demand and most equity markets in the region falling on Wednesday.

Production in the world’s second-largest economy was dented by a new round of city lockdowns in August, which has hurt manufacturing and export hubs such as Yiwu in southeastern Zhejiang province.

The country has also had to deal with droughts and heatwaves, causing power shortages that forced several provinces and cities to suspend or restrict electricity supplies to factories.

Imports also missed estimates, rising just 0.3 per cent year on year in August, below expectations for 1.1 per cent growth.

“Pricing effects will continue to cloud the picture for trade performance — in real terms, China’s import growth has turned negative since late in the first quarter, suggesting that the demand side is still facing headwinds,” Zhou added.

Analysts warned that Chinese exports — which boomed at the onset of the pandemic as demand for many electronic goods surged — may soften further as much of the world begins to treat the virus as endemic and the prospect of a global recession looms.

“Now that most economies have reopened, consumption patterns are shifting back from durable goods to services,” analysts at research group Capital Economics wrote in a note. “Going forward, high inflation and tighter financial conditions elsewhere will also be an increasing drag on foreign demand for Chinese goods.”

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