China’s Export Slump Continues as Domestic and International Demand Weakens
China’s export woes continued for the fourth consecutive month as both domestic and international demand weakened, according to official figures.
Exports for August saw an 8.8% decline compared to the same period last year, while imports also dropped by 7.3%. Though these figures represent a concerning trend for the world’s manufacturing powerhouse, they were somewhat better than anticipated and an improvement from the previous month.
Several factors are contributing to China’s economic challenges. The ongoing global demand slump for Chinese-made products, exacerbated by the COVID-19 pandemic and trade disputes with the US, is significantly impacting a vital source of economic growth.
Furthermore, a new report from the US Census Bureau indicates a sharp decline in China’s share of US goods imports, reaching its lowest level since 2006. Once America’s primary trading partner, China has slipped to third place behind Mexico and Canada. This shift is a result of both strained US-China relations and China’s evolving economic landscape.
China is also grappling with a deepening crisis in its real estate market, with major developers facing financial difficulties. Despite these challenges, Beijing has chosen not to implement a massive stimulus program but has introduced a series of measures to support citizens and businesses. These measures include interest rate cuts by the central bank, plans to reduce minimum deposits for homebuyers in major cities, and encouraging lenders to lower mortgage rates. Additionally, measures like increased personal income tax allowances for children’s education and reduced duty on share trading have been announced.
Shifting to Southeast Asia
As China falls off the podium as the US’ top trading partner, it shifts its largest export market to Southeast Asia.
Shipments to members of the Association of Southeast Asian Nations (ASEAN) have surged to nearly $600 billion per month, surpassing exports to the US and European Union. This shift is partly attributed to the Regional Comprehensive Economic Partnership (RCEP), led by Beijing, becoming the world’s largest free-trade bloc, facilitating the reworking of global supply chains. Southeast Asia now serves as the final assembly point for parts sourced from China, which are then exported globally.
HSBC Chief Asia Economist Frederic Neumann said in a Bloomberg report that the growing interdependence between Southeast Asia and China could help stabilize global trade, particularly as demand from developed markets slows. And it goes both ways, Asean’s largest export market is China, where the domestic market consumes the goods.
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