China's April Exports 'Surprisingly' Increased... "Export Outlook Remains Gloomy" (Comprehensive)

[Asia Economy Beijing=Special Correspondent Park Sun-mi] Contrary to market expectations that China’s exports in April would decline by double digits, they increased by 3.5% year-on-year, but the prevailing view is that it is premature to be optimistic about economic recovery.

According to the General Administration of Customs of China on the 7th, China’s dollar-denominated exports in April increased by 3.5% compared to the same period last year. Most experts had predicted that China’s exports in April would show a double-digit decline due to the impact of COVID-19. Bloomberg estimated the export decline at around 11%.

Exports increased as the COVID-19 situation in China eased, leading to the relaxation of population movement restrictions and attempts to normalize the economy. The increase in China’s medical supplies exports amid the global COVID-19 atmosphere also contributed to the export growth. Exports in January and February this year decreased by 17.2% year-on-year, and in March they fell by 6.6%, but April showed an unexpectedly rapid export rebound. Supported by export growth, China’s trade surplus in April recorded a $45.34 billion surplus. The surplus size was significantly larger than the $5.35 billion expected by experts.

However, among experts, the dominant view is that it is premature to forecast a recovery in China’s export economy. This is because the global spread of COVID-19 has reduced worldwide demand for Chinese goods, which is likely to negatively affect China’s exports. Although many export factories in China have resumed operations as the COVID-19 situation calmed, overseas orders are being canceled or postponed due to reduced demand for Chinese products amid the global COVID-19 spread.

In particular, the Purchasing Managers’ Index (PMI) for China’s manufacturing sector released last week revealed that China’s export economy has not yet fully recovered due to shrinking overseas demand. The manufacturing PMI for April, released by the National Bureau of Statistics, recorded 50.8, slightly down from 52.0 in the previous month and also lower than the average expert forecast of 51.0. Although it succeeded in surpassing the baseline of 50, it fell short of expectations.

Among the sub-indices that make up the manufacturing PMI, new export orders fell from 46.4 in March to 33.5 in April, reflecting the shock of decreased global demand. The Caixin manufacturing PMI for small and medium-sized private enterprises surveyed also dropped to 49.4 in April from 50.1 in the previous month.

Lewis Kuijs, Chief Economist at Oxford Economics, explained, “China’s export recovery in April will not continue. Overseas demand for Chinese goods is struggling due to global COVID-19 containment measures and social distancing. The increase in export volume in April may partly reflect orders delayed by supply constraints in the first quarter.”

Meanwhile, statistics showing that China’s imports in April this year decreased by 14.2% year-on-year also indicate that China’s domestic demand remains weak due to the COVID-19 crisis. The decline in imports in April was significantly larger than the 0.9% decrease in March. This result is related to the worsening employment market as many migrant workers lost jobs due to the COVID-19 outbreak and companies with deteriorating profitability reduced their workforce.

Nomura analysts expect this situation to continue for some time, forecasting that China’s export decline in the second quarter will widen to 30%, and the gross domestic product (GDP) will contract by 0.5%.

This content was produced with the assistance of AI translation services.