May 17, 2021

China’s Trade Data Is Significantly Weaker Than Forecast

HONG KONG — Chinese trade data for June came in much weaker than expected on Wednesday, offering up the latest evidence that the Chinese economy has lost much of its previous vigor.

Exports fell 3.1 percent from a year earlier — the first drop since early 2012 — the customs department reported, and imports decreased 0.7 percent, falling for the second month in a row. Both figures were far below the expectations of analysts, who had projected a 4 percent rise in exports and an 8 percent climb in imports.

The weak import data underlined slack demand within China. The export slump reflected weak overseas demand, but analysts said it was also partly attributable to a recent government crackdown on false export reporting by companies that had been seeking to bypass currency controls and move money into the country as a way to place a bet on further appreciation of the currency, the renminbi. The strengthening currency and rising wages in China have helped erode the country’s competitiveness at a time when demand from export markets like the United States remains lackluster.

Growth in China has been cooling for many months as the new leadership in Beijing seeks to shift the economy away from a credit-driven and increasingly outdated growth model. For years, China has relied on heavy manufacturing, state-sponsored investment and exports to power growth. Aware of the limits of these growth drivers, China is now seeking to foster more domestic demand and raise productivity.

Policy makers have also been seeking to rein in the rapid credit growth that has built up in recent years and created new potential risks to the economy. Last month, China’s central bank engineered a cash crunch within the banking sector in a bid to get commercial lenders to adopt more prudent lending practices.

The cost of this shift is slower economic expansion, and analysts on Wednesday cautioned that this could start to impinge on China’s ability to create new jobs for the millions of fresh graduates who enter the work force each year.

China is unlikely to achieve its target for this year of 8 percent growth in trade, Liu Li-Gang, a China economist at ANZ in Hong Kong, wrote in a research note. “This will not only bring about downside risk to the G.D.P. growth for this year but also place severe pressure on employment,” Mr. Liu wrote, referring to gross domestic product.

For now, however, Beijing appears comfortable with the economy’s performance.

At a meeting in southern China on Tuesday, the prime minister, Li Keqiang, said that although major economic indicators remain within reasonable bounds, growth is facing challenges, the state-run Xinhua news agency reported.

“This year, economic activity has in general stayed stable, and the main indicators are still within reasonable bounds for the annual forecasts,” Mr. Li said. “But economic conditions have become more complex and changeable. There are both favorable and unfavorable factors, and the economy has both momentum for growth and downward pressures.”

China must maintain steady growth while also carrying out adjustments needed to ensure healthy development in the long-term, he said. “Macro adjustment must be both grounded in the present and take a long-term view, so that economic activity is within reasonable bounds, and the rate of economic growth and employment levels do not slip below the lower limit.”

Chris Buckley contributed reporting.

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