China’s foreign trade goes off to steady start in first two months, though export pressure lingers
Pressure on exports likely to ease in Q3: experts
Published: Mar 07, 2023 06:29 PM
China trade economy  File photo: VCG

China trade economy File photo: VCG

China's foreign trade goes off to a steady start in the first two months of 2023, with better-than-expected exports and improved trade quality, easing market concerns over the export outlook of the world's second-largest economy this year. 

As overseas inflation slows down and demand picks up, it is expected that China's exports, one of the driving forces of the country's GDP, will improve in the third and fourth quarters, experts and research agencies said.

China's dollar-denominated foreign trade hit $895.72 billion in the January-February period, down 8.3 percent on a yearly basis. Exports fell 6.8 percent while imports were down 10.2 percent year-on-year, data from the General Administration of Customs showed on Tuesday.

China releases the two-month data on a combined basis to smooth the impact of the Lunar New Year holiday, which falls at different times during the first two months in different years.

"The single-digit exports decline was better than expected, as we earlier forecast that it would be a double-digit drop, following the downward trend at the end of last year," Tian Yun, an independent macro analyst, told the Global Times on Tuesday.

Exports in dollar terms have been on a downward since the fourth quarter of last year. In December, exports fell by 9.9 percent, dragging down the annual export growth rate to 7 percent.

"If the factor of a strengthening dollar is considered, we can say that exports in the first two months were on a steady track," Tian said.

In yuan terms, total trade in the first two months came in at 6.18 trillion yuan ($890.5 billion), edging down 0.8 percent year-on-year. Exports saw a slight increase of 0.9 percent while imports went down 2.9 percent, according to the customs data.

Zhou Maohua, an economist at Everbright Bank, told the Global Times on Tuesday that the resilience of Chinese exports eased market concerns, and it is expected that foreign trade will still play a positive role in supporting economic growth in 2023.

"We can see the quality of China's exports is keeping on improving," Tian added.

In the first two months, exports of mechanical and electrical products stood at 2.03 trillion yuan, an increase of 0.4 percent, accounting for 58 percent of the total export value, while exports of labor-intensive products like clothes and shoes dropped by 7.4 percent year-on-year.

Also, the private sector is playing a bigger role. The total trade of such companies reached 3.16 trillion yuan in the first two months, up 5.3 percent. This segment of trade accounted for 51.2 percent of China's total foreign trade, up 3 percentage points from last year. 

State-owned enterprises' exports rose 5.3 percent, while those of foreign-funded firms tumbled 12.2 percent.

"The diversification and increase of high-tech products and private enterprises in the proportion of foreign trade showed a continuous optimization of the country's export structure," Zhou said.

The Association of Southeast Asian Nations (ASEAN) remains China's top trading partner during the first two months, with total trade rising 9.6 percent to 951.93 billion yuan, accounting for 15.4 percent of the country's total trade. 

The EU came second with 851.09 billion yuan, down 2.6 percent, while the US was third with 702.98 billion yuan, down 10.6 percent.

High inflation and high interest rates in major overseas economies have had a negative impact on consumer confidence and spending power there, limiting their imports. Considering the high base in 2022, China's foreign trade growth will face some pressure this year, experts said.

"As overseas inflation gradually slows down, interest rate hikes are set to come to an end in the second half of the year, and overseas demand will rebound, so it is likely that China's exports will pick up in the third and fourth quarters," Zhou said.

Demand for Chinese goods from the US and Europe may rebound in the second half of the year, according to China Merchants Securities.

Pressure on China's foreign trade will increase this year as external demand dwindles and the risk of a global recession grows, Commerce Minister Wang Wentao told a news conference on Thursday.

"We will make more efforts to stabilize foreign trade and optimize trade structure. At the same time, we will listen to the concerns of market players to formulate targeted policy measures and help them develop better in international markets," Wang said.