China’s slowing export growth reflects a worsening demand situation in the global electronics sector, analysts said in the wake of data showing the steepest monthly decline in the country’s outbound shipments in two years.
China’s exports fell 4.4 per cent year on year in dollar terms last month, according to data from China’s General Administration of Customs. The figure was well below a median forecast predicting growth of 3 per cent from economists polled by Reuters and saw China-focused stocks move lower on Monday.
Here’s a quick roundup of what analysts are saying about the outlook for exports:
Nick Marro, Economist Intelligence Unit analyst, said while the data showed the US-China trade war was finally starting to feed into China's macroeconomic data, “the trade war isn't the only factor here.” He added:
The peaking in the global consumer electronics demand cycle, which also puts pressure on Taiwanese and Malaysian exports in late 2018, is also relevant. This would have been particularly painful for shipments of final electronics goods, such as mobile phones and computers, which are not yet covered by the US tariffs.
Raymond Yeung, ANZ economist, said a trade recession was now likely in China and also noted the importance of the slowing global electronics cycle to Chinese exports:
A potential downturn in the [electronics] sector poses the real risk to China’s external outlook even if China and the US reach a resolution on their trade dispute … Even though there are signs that the US and China may be able to reach a trade ‘deal’, the reality is that the US economy is slowing, hurting the demand for China’s products.
Julian Evans-Pritchard, Capital Economics economist, agreed that China’s exports “will remain weak even if China can clinch a trade deal that rows back Trump’s tariffs”. He added:
With [China’s] policy easing unlikely to put a floor beneath domestic economic activity until the second half of this year, import growth is likely to remain subdued.
Iris Pang, ING economist, said falls in Chinese electronic imports and exports was related to “the lack of demand for upgrading smartphones, and also the start of foreign companies avoiding using China-made electronic components”. Ms Pang also said:
With regard to the possible shunning of China-made electronics by foreign firms, China could rely more on domestic demand as external demand fades. But exports and imports of electronic parts and goods will still likely continue to shrink in 2019.
Nomura analysts said the export statistics might lead the recent strength of the renminbi to be “short lived” and suggested policymakers in Beijing “will need to take more aggressive measures to stabilise GDP growth”.
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