China’s trade performance improved slightly in September, as both exports and imports contracted at a slower pace than in August. According to the General Administration of Customs, exports fell by 6.2 per cent year on year to US$299.1 billion, while imports also fell by 6.2 per cent to US$221.4 billion. The declines were smaller than the 8.8 per cent and 7.3 per cent drops recorded in August, respectively.
The trade surplus in September widened to US$77.71 billion, up from US$68.4 billion in August. The surplus with the United States, China’s largest trading partner, increased by 5.9 per cent to US$37.7 billion.
The data showed that China’s trade has been affected by the global demand slump caused by the coronavirus pandemic, as well as the supply chain disruptions and rising costs of raw materials and shipping. However, the easing of the trade slowdown also indicated that China’s economy has started to stabilise after a sharp slowdown in the second quarter.
Regional trade remains resilient amid geopolitical tensions
Despite the ongoing trade frictions with the US and Europe, China has managed to maintain its trade with its regional partners in Southeast Asia, as well as the countries participating in the Belt and Road Initiative (BRI). The BRI is a China-led project to develop infrastructure and connectivity across Asia, Africa and Europe.
According to customs data, China’s trade with the Association of Southeast Asian Nations (ASEAN) grew by 10.4 per cent year on year in the first nine months of 2023, reaching US$589.8 billion. ASEAN surpassed the EU as China’s largest trading bloc in 2022, and has remained so this year.
China’s trade with BRI countries also increased by 6.4 per cent year on year in the same period, reaching US$19.1 trillion. China claimed that cargo transported along the rail lines connecting China and Europe accounted for 8 per cent of China-EU trade in 2022, up from 1.5 per cent in 2016.
China is set to host the third BRI forum in Beijing next week, with Russian President Vladimir Putin expected to attend.
Domestic demand remains weak amid property slump
While China’s exports have shown some signs of recovery, its imports have remained sluggish, reflecting the weak domestic demand and consumption. Imports of iron ore, coal, copper and crude oil all declined in September from a year ago, as China’s industrial production and investment slowed down.
One of the main factors behind the weak domestic demand is the slump in the property sector, which accounts for about a quarter of China’s GDP. The sector has been hit by a series of regulatory measures aimed at curbing debt and speculation, as well as the debt crisis of Evergrande Group, China’s largest property developer.
Evergrande has been struggling to repay its debts of over US$300 billion, and has missed several interest payments since September. The company’s woes have sparked fears of a contagion effect on other developers and financial institutions, as well as social unrest among its customers and suppliers.
The property slump has also weighed on consumer confidence and spending, which are crucial for China’s economic transition from investment-led growth to consumption-led growth. China is set to release its retail sales data for September on October 18, along with its third-quarter GDP figures.
The International Monetary Fund (IMF) this week trimmed its 2023 China growth forecast to 5 per cent from 5.2 per cent, while maintaining a global growth forecast of 3 per cent for the year.