China External Debt (USD bn)

Merchandise exports decline in January–February

Merchandise exports declined 6.8% in annual terms in January–February, a softer fall than markets were expecting. Meanwhile, merchandise imports plunged 10.2% on an annual basis in the same two months, almost twice as large a fall as markets had forecast. The weak trade data can be explained by a global downturn in goods demand—particularly of electronics, China’s key export sector. Moreover, imports could also have been affected by the U.S. ban on chip-related sales to China. The trade surplus in the first two months of the year was USD 117 billion, up from the USD 110 billion surplus recorded in the same period a year ago.

Our analysts see exports contracting over this year as a whole amid tepid external demand, while imports are seen rising thanks to stronger domestic demand on the back of economic reopening.

On the near-term outlook, the EIU said:

“The contraction of exports could narrow in March, as production further recovers in China and demand in key overseas markets remains resilient. However, downward pressures will deepen over the second and third quarters of 2023, as US household consumption softens, before an improvement in external demand materialises by late 2023/early 2024.”