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China’s exports rose 2.5 per cent year on year in dollar terms in March and imports hit a monthly record, as turbulence in the Middle East and rising fuel costs weighed on the country’s trade.
The weakening momentum comes as Beijing prepares for renewed trade talks with the US ahead of a planned meeting in mid-May between Presidents Donald Trump and Xi Jinping.
The March export growth figure fell short of a median forecast of 8.6 per cent among analysts surveyed by Bloomberg, and the 21.8 per cent recorded in January and February combined, when China celebrated the lunar new year holiday.
“Some moderation was to be expected after a strong start to the year, but the March data came in a little softer than expected,” said Lynn Song, chief China economist at ING.
Imports surged 27.8 per cent in March year on year as fuel prices rose in the Middle East, exceeding a Bloomberg median forecast of 13.9 per cent and the previous figure for January and February combined of 19.8 per cent.
“The international situation is currently turbulent and unstable, with intensifying geopolitical conflicts, sharp fluctuations in international oil prices, contractions in global demand and production, and disruptions to logistics and supply chain order,” said Wang Jun, vice-minister of China’s General Administration of Customs.
The fuel price shock has shaken China out of a long period of deflation and is hitting some industries, such as those dependent on some petrochemicals.
It comes as China has grown increasingly dependent on exports to offset weak domestic demand and reach ambitious economic growth targets set by Xi as part of his plan for China to become a high-income country.
ING’s Song said inputs for China’s tech industry on the back of the AI boom also accounted for the rise in imports. Year-to-date chip imports, for instance, were up 11 per cent by volume and 45 per cent by value.
“The import side still looks mostly tied to higher tech product prices rather than due to energy prices for now but the higher energy prices will certainly start to factor more into the equation in the coming months,” Song said.
Despite the weakening export growth, China’s monthly trade surplus still grew by $51bn. The surplus surpassed $1tn on an annual basis last year for the first time.
China has been reporting rising surpluses at a time when other trading partners, such as the EU, are struggling with high costs, rising inflation and currency appreciation, fuelling trade tensions.
“The global economy’s ability to absorb China’s excess capacity is showing signs of wearing thin, particularly given the dampening effect of the Iran war on non-food and non-energy household consumption in most countries,” said Eswar Prasad, professor of economics at Cornell University.
In a sign of the impact from the Middle East on China’s trade, a spokesperson for the General Administration of Customs said trade with that region declined in March after rising in the first two months.
