China's Exports Record Biggest Decline in More Than 3 Years

China's exports contracted more than expected in June, hit by shrinking global demand and adding to concerns about the world's second-largest economy.

China's Exports Record Biggest Decline in More Than 3 Years

The dollar value of China’s exports fell 12.4% from a year earlier in June, a much greater drop than the 9.5% predicted in a Reuters survey and the 7.5% in May.

Imports fell 6.8% in June compared to a year earlier, which was also worse than expected, as a 4% drop and a 4.5% decline were both predicted.

China's exports fell in June by the most since the Covid-19 pandemic began, due to high inflation and geopolitical factors.

The release of trade data on Thursday is another sign that China's leaders cannot rely solely on external factors to revive the faltering momentum in the second largest economy in the world. The drop in imports for June was also greater than expected. This suggests that local demand has waned.

Zhiwei Zhang is the president and chief economics at Pinpoint Asset Management. He said that the latest data from developed countries shows consistent signals of continued weakness, which will likely increase pressure on China's imports for the remainder of the year.

He added, "China must depend on its domestic demand." The big question for the next few weeks is whether the domestic demand can recover without government stimulus.

Customs data released on Thursday showed that the dollar value of China’s exports fell 12.4% from a previous year. The drop is much greater than the 9.5% predicted by Reuters and 7.5% in May. This was the largest percentage drop that the second-largest global economy had recorded since February 2020.

Imports fell 6.8% in June compared to a year earlier, which was also worse than expected, as a 4% drop and a 4.5% decline were both predicted.

Lu Daliang said that China's exports are still under pressure, in part due to the high inflation rate in developed countries, and geopolitics.

Press Conference


Growing divergence

The customs bureau did point out a growing divergence between China's trade and that of the United States and European Union. Trade with Southeast Asia and "Belt and Road partners" is outperforming the trade with those economies.

China and the Association of Southeast Asian Nations (ASEAN) are currently in negotiations for the deepening of a partnership in a free-trade zone and the full implementation of Regional Comprehensive Economic Partnership. This is a trade bloc supported by China, which includes Australia, Japan South Korea and New Zealand, as well as the 10 ASEAN members states. China's top diplomatic Wang Yi announced this at an ASEAN Foreign Ministers' Meeting in Jakarta on Thursday.

CNBC calculated official data obtained via Wind Information to show that China's exports in the U.S. fell by 24% from last year to $42.7 billion. Imports also dropped 4%, to almost $14 billion.

The data shows that China's exports in June to the 10 ASEAN members fell by 17%, to $43.3 billion, compared to a year earlier, and imports dropped by 4%, to $34.1 billion.

China's trade growth with countries along the "Belt and Road", compared to a year earlier, slowed down to 9.8% in the six-month period of this year. This is down from 13.2% in the five-month period of last year.

The official figures released on Thursday showed that the value of China’s combined trade with ASEAN was $77.4 Billion in June. This is a higher sum than China’s trade with the EU, which stood at $68,8 Billion and with the U.S.A. at $55.7 Billion.

Zichun Huang, China economist at consultancy Capital Economics, said: "The good news is that we are probably past the worst of this decline in demand for our products abroad."

"Recessions are still on the horizon for developed economies. However, they will be milder and only have a limited impact on Chinese imports." Huang said that shipments of green technologies, such as EVs, solar panels and batteries made in China, could continue to increase rapidly. This would help exports to return to growth.

Domestic demand

Zhou Hao is an economist with Guotai Junan International. He said: "Looking forward, the headwinds for the external sector remain strong, which calls policy support to the domestic demand."

China's leaders are showing they will be targeted and judicious in their support for policy. Last week, Chinese Premier Li Qiang


Introduce targeted and coordinated policies and implement them timely to stabilize growth and ensure employment and protect against risks.

Li also emphasized the importance of a mix of effective policies, as China is currently in a period of critical economic recovery and upgrading of its industrial base.

The National Financial Regulatory Administration and the People's Bank of China released a statement late on Monday.

Joint statement

They were offering loan relief to some developers and stressed that their goal was to make sure homes under construction can be delivered.

China's annual producer price


Official data released Monday showed that consumer prices remained unchanged for the ninth consecutive month, while the Chinese economy is on the brink of deflation. This shows the challenges facing the Chinese government in revitalizing the growth and reviving the demand to achieve its stated goal of 5%.