China: Near-term trade outlook looks fragile – UOB

Economist at UOB Group Ho Woei Chen, CFA, gives her opinion on the outlook for the trade balance in China.

Key Quotes

“China’s exports (in USD-terms) unexpectedly rose 3.5%y/y in April vs. consensus forecast of - 11.0% and -6.6% in March. However, imports declined by a larger -14.2% y/y in April vs. consensus forecast of -10.0% and -0.9% in March. As such, the trade surplus widened to US$45.3 bn in April from $19.9 bn in March.”

“By markets, China’s exports rose across most destinations in April, led by Japan (+33.0%), Australia (+32.0%) and Taiwan (+20.9%) while exports to India fell sharply due to the worsening COVID-19 pandemic situation. Its shipments to the US rebounded sharply to 2.2% y/y in April from -20.8% y/y in March while exports to ASEAN maintained growth at 4.2% y/y.”

“In the four months of the year, China’s exports and imports contracted by -9.0% y/y and -5.9% y/y respectively. In the period, its imports from the US had fallen by a comparable -5.6% y/y but exports to the US fell a larger -18.1% y/y, reflecting the demand fallout in the US. Thus, China’s trade surplus with the US narrowed to US$63.57 bn YTD compared to US$83.54 bn in the year ago period.”

“Overall, both external demand and the global supply chain have suffered severe disruptions from the scale of the worldwide pandemic lockdowns. Despite the unexpected gains in April’s exports which was boosted by shipments of medical supplies, the sharp pullback in new export orders in China’s April manufacturing PMI suggests that near-term trade outlook remains tilted to the downside.”