Skip links

Inflation makes note of its effect hitting the demand and tilting to the low rates of the field of the portacontainer

China marked an increase in exports in July, but projections indicate a gradual decline in the curve.

 

China’s total trade surplus reached an all-time high of US$101.26 billion in July, compared to US$97.94 billion in June. China’s export growth continued its upward momentum to exceed expectations in July as it grew 18% over the previous year to US$333 billion, compared to 17.9% in June, according to data released by China Customs. The July figure exceeded expectations of a 16.2% increase, according to Wind, a provider of financial reporting services in China.

Meanwhile, imports remained weak, growing only 2.3% year-on-year in July to US$231.7 billion and marking a 1% increase over June, well below the forecast increase of 4.5%, bringing the total trade surplus to a record level, according to the latest official data.

Zhang Zhiwei, president and chief economist of Pinpoint Asset Management, said that “strong export growth continues to help China’s economy in a difficult year, as domestic demand remains sluggish”.

Worrying signs

China’s exports, driven largely by strong demand from the US, have certainly been a bright spot during the pandemic. However, there are signs that American consumer demand is not sustainable. In addition, reports from manufacturers suggest that the resilience seen in China’s export data may fade.

It should be noted that the above mentioned boom in Chinese exports has been partly aided by price inflation, as well as the reactivation of the Chinese manufacturers who compensated for the delays of the blockades by the pandemic and the orders that were advanced in the light of the continuous distortions of the supply chain, but there would no longer be much more cloth to cut. This would mean difficulties for China and would explain in passing why container shipping tariffs continue to fall.

In fact, this decline has already been perceived by Chinese manufacturers in all sectors (from Christmas decorations, clothing and tents), who say that orders from foreign customers are slowing, and some predict flat demand at best compared to last year, according to Bloomberg News.

Such is the threat that the Central Bank of China unexpectedly cut its interest rates in order to boost an economy burdened by the Covid blockades that add to other more worrying developments, including:

Home prices in China fell for the eleventh month in July, marking a growing housing recession in the country.
While industrial production increased by 3.8 per cent over the previous year, the figure is below 3.9 per cent in June.

Retail sales also grew at a slower pace than expected.
Sichuan province is asking factories to close to alleviate energy shortages as heat waves increase demand for energy for refrigeration and air conditioning.

In addition, the International Monetary Fund cut at the end of July its growth forecast for China in 2022 to 3.3% from 4.4% in April, due to the country’s draconian containment measures by COVID-19. China has set itself a growth target of “around 5.5 per cent” this year.

Thus, “the general expectation is that the growth of (Chinese) exports will slow down in the coming months and may reach negative territory by the end of the year,” Larry Hu, head of China’s economy at Macquarie Group, told Bloomberg. “Even so, the decline in demand for products manufactured in China will be gradual, rather than a collapse,” he said.

All of the above would imply that US ports observe less retail cargo income in the second half of the year, according to the prospects of the National Retail Federation.

This process also coincides with a shift in global consumer spending from goods (the predominant trend during the pandemic) to services, as travel demand increases in many parts of the world. Faced with this, Big Players in retail like Walmart and Target are cutting prices of goods such as clothing and household items, even when they charge more in other categories amid rising US inflation.

Leave a comment