THE TRADE REPORT for April brings further evidence of the headwinds facing the economy.
China’s General Administration of Customs reported today that goods exports grew by 3.9% year-on-year in April in dollar terms, the slowest pace since June 2020, while imports showed no growth year-on-year.
Since importers are paying significantly higher prices for commodities, this implies substantially lower import volumes than last year.
Lockdowns in big cities have severely disrupted global supply chains. At the same time, global demand for goods, especially electronics, is starting to weaken in the face of inflation squeezing consumers’ disposable incomes, and services recovering the share of spending lost to good goods during the pandemic.
The purchasing managers’ index for April showed that manufacturers’ employment intentions declined. That was also true in services, but it was the eighth drop in nine months for manufacturing. Premier Li Keqiang has promised to intensify efforts to stabilise the job market and expressed concern about the ‘grave’ outlook. The dotted line between unemployment and social instability always looks to top leadership to be short and threatening.
As Li indicates, monetary and fiscal policy is being selectively loosened, and there is likely more to come. Yet the latest trade figures add weight to arguments that the economy may grow little in the second quarter and might even contract.
The bind authorities find themselves in is that meeting the target of 5.5% GDP growth this year depends on the lockdowns easing substantially by the middle of the year. Under- and ineffective vaccination and the political dynamics of doubling down on the zero-Covid policy make that an impossibly tight deadline.