China: Merchandise exports drop in March
Merchandise exports decreased 7.5% year-on-year in March, contrasting February’s 5.6% increase. The outturn marked the sharpest contraction since August 2023 and was over twice as steep a fall as markets were expecting. A high base of comparison weighed on the reading—exports surged in March 2023 as manufacturers worked through backlogs following the easing of Covid-19 restrictions. The decline in exports was broad-based across destinations and product types, though car exports remained a bright spot. Meanwhile, merchandise imports declined 1.9% on an annual basis in March (February: -8.2% yoy).
As a result, the merchandise trade balance improved from the previous month, recording a USD 58.6 billion surplus in March (February 2024: USD 39.7 billion surplus; March 2023: USD 77.1 billion surplus). Lastly, the trend pointed down, with the 12-month trailing merchandise trade balance recording a USD 825.8 billion surplus in March, compared to the USD 844.3 billion surplus in February.
China’s merchandise exports should rise in 2024 as a whole relative to 2023, though by less than in neighboring economies such as Taiwan and Korea. This will likely be due to Western trade and tech restrictions on Chinese products, and overcapacity in some Chinese export sectors weighing on export prices.
On problems facing Chinese exporters, EIU analysts said:
“China faces unique headwinds. Although global demand has picked up, it is not strong enough to lift the prices of Chinese exports and reverse the country’s worsening terms of trade. […] Falling export prices were driven in part by global disinflation, but far more importantly by China’s overcapacity in a few sectors. This manifested in steel exports, which surged by 30.7% year on year in volume terms in the first quarter, but fell by 12.9% in value terms, implying a 33.4% drop in unit prices.”