China’s exports plummeted in the first two months of the year as the coronavirus outbreak disrupted global supply chains, damped business activity and blocked transport across the world’s second-largest economy.
China’s overall exports contracted by 17.2 per cent in dollar terms in January and February, more than was expected by economists polled by Bloomberg. Imports fell by 4 per cent. China posted a trade deficit of $7.1bn in the first two months of the year.
The slowing of imports raises doubts that China will be able to meet its target in its trade deal with the US. China has agreed to buy $200bn more US goods than it did in 2017, the baseline before the start of the trade war, over the course of two years. But imports from the US rose just 2.5 per cent year on year in January and February. Exports to the US fell almost 28 per cent.
“I think this is a typical supply shock at the first glance as imports look much better than exports. Basically manufacturers imported the raw materials but were unable to produce and export due to shutdown of the production and logistics,” said Zhou Hao, senior emerging markets economist at Commerzbank. “However, if the demand can’t recover, which is probably the case due to virus spread globally, China’s imports would also further soften going forward.”
Imports of commodities rose with soyabean purchases rising 14.2 per cent, coal rising 33.1 per cent and iron ore up 1.5 per cent.
The contraction in trade was mainly due to the virus outbreak and the lunar new year holiday, China’s customs administration said in a statement on its website on Saturday.
China’s trade data in January and February are normally volatile due to seasonal distortions caused by the long lunar new year holiday when businesses shut down and factory production and port operations are disrupted.
But the coronavirus outbreak has exacerbated the negative economic impact. The country has imposed draconian quarantine measures and travel restrictions across large swaths of the country.
China’s dismal trade figures come after manufacturing activity plunged to a record low, indicating a massive contraction in manufacturing and service sector activity last month.
More than 80 per cent of 2,552 foreign trading companies in China have returned to work, according to a survey by China’s customs administration released on Saturday. However, less than a third of small and medium-sized businesses, which employ almost 80 per cent of China’s labour force, are operating normally, the Ministry of Industry and Information Technology said last week.
This is the first time that China has combined the release of January and February trade data, bringing it into line with how some other major Chinese economic indicators are released early in the year. The move is intended to smooth out seasonal variations.
Additional reporting by Don Weinland in Beijing