No matter how you crunch the numbers, China’s trade data has failed to pierce the gloom as the Cover-19 catastrophe engulfs the global economy.
Data released on Tuesday bucked economic surveys with exports in dollar terms falling by 6.6% in March compared to the same period last year. As for imports, they slipped by just 0.9%.
Economists had expected exports to drop by around 14% after combined figures for January and February highlighted a plunge of 17.2% from 2019. Imports also suffered, tumbling by 9.5% as most of China went into various forms of lockdown after Chinese New Year.
“With economic activity in the rest of the world now collapsing, the worst is still to come for China’s export sector,” Julian Evans-Pritchard, the senior China economist at Capital Economics said.
“The improvement in trade was probably larger than the change in the headline figure suggests. After all, March shipments were stronger than the average across January before the outbreak impacted trade and February when most factories were closed, and port operations were disrupted,” he added. “But the recovery in exports is likely to be short-lived.”
Nearly two million people across the planet have been infected by this new strain of coronavirus with the death toll edging close to 120,000.
Already the World Trade Organization has warned that 2020 could see the biggest collapse in international trade since the Great Depression or the “worst recession of our lifetimes.”
Last week, the International Monetary Fund issued a similar statement, pointing out that the planet now faces the deepest downturn since the 1930s. It was another reference to the Great Depression.
A report by JPMorgan Chase, the investment bank, has also suggested that dwindling output could wipe out $5.5 trillion, or almost 8% of GDP, by the end of 2021.
The omens have certainly taken a sinister turn with business activity flatlining as the Covid-19 pandemic spreads. In response, global governments have injected $8 trillion into the system to prop up creaking economies.
In March, data from the National Bureau of Statistics showed that China’s industrial production for January and February dropped by 13.5% for the first two months of the year compared to the same period in 2019. Retail sales also plunged by 20.5%. The record-breaking fall continued when it came to fixed asset investment, which plummeted by 24.5%.
To complete an appalling set of numbers, profits at industrial firms during the same period slumped 38.3% from a year earlier to 410.7 billion yuan or $58.15 billion. Moreover, that was the lowest level recorded in a decade.
So while the trade data was encouraging, the overall outlook is on the wrong side of bleak.
“On average, we forecast Chinese merchandise export and import growth to be negative this year,” Nick Marro, of The Economist Intelligence Unit, wrote in a note.
“Pressure on global demand will persist through the second quarter, with a high risk of these shocks bleeding into the second half of 2020, although much of this is contingent on when, or if, the Covid-19 pandemic comes under control,” he added.
Breaking down the data, China’s surplus with the United States narrowed again last month by 25.3% to $15.3 billion compared to the same period in 2019. The US deficit was a key issue in a grueling two-year trade war between Beijing and Washington before a phase one deal was signed in January.
But the sheer scale and depth of the coronavirus outbreak has cast an even longer shadow over the global economy as analysts wait for China’s first-quarter GDP figures later this week.
“This recovery is likely to be short-lived, given the sustained significant downward pressure in [the second quarter] amid a rapid deterioration in external demand, even after some of the supply-side disruptions have eased. In Q2, we expect the contraction in China’s exports to widen to 20-30% from around -13% in Q1, amid an expected growth slump in the country’s major trading partners,” Barclays, the multinational investment bank, said in a note.
Media reports have also revealed that the world’s second-largest economy is facing a myriad of problems with more than 240,000 Chinese companies filing for bankruptcy in the first two months of the year.
Even though factories and businesses are ramping up again, domestic consumption has been sluggish, while manufacturers will struggle to secure new overseas orders.
“The spread of Covid-19 is still accelerating, causing a serious impact on the world’s economic development,” Li Kuiwen, a spokesman for China’s General Administration of Customs, said at a media conference after the trade statistics were released.
“Shrinking demand in the international market will inevitably deal a blow to exports,” he added.
And the global economy.