China’s trade fell less than expected even as coronavirus spreads around the world

China’s trade performed better than expected in March, with both exports and imports declining less than expected even as the coronavirus prompted business shutdowns around the world.

Exports declined 6.6 per cent in dollar terms in March from a year earlier, while imports fell 0.9 per cent, the customs administration said Tuesday.

Economists had forecast that exports would decline by 13.9 per cent, while imports would shrink by 9.8 per cent. The trade balance narrowed to $19.9 billion in the month.

The data indicate that global supply chains may be adapting better than thought, and that China’s gradual economic restart is proceeding. At the same time, the full effect of a collapse in demand in developed economies like the US and Europe may not be yet apparent in China’s trade data.

Exports did better than people thought as most exporters only saw orders cancelled since the middle of the month, said Zhou Xue, an economist at Mizuho Securities Asia Ltd. in Hong Kong. “The expected plunge in exports was not fully reflected in the data and the second quarter could be much worse.”

The Association of South East Asian Nations (ASEAN) became China’s biggest trading partner bloc, surpassing the European Union, partly due to the effect of Brexit, but also increasing regional semiconductor trade, the customs administration Spokesman Li Kuiwen said at a press conference in Beijing.

Slowing demand

Now, even as the domestic virus situation is improving, more and more of China’s overseas markets are locking down. That will hit not only demand for China’s goods, but could also damage the supply of raw materials and intermediate components.

Export orders have been stopped by US and Europe importers after early March as the number of city lockdowns increased. This will affect Aprils exports, according to Iris Pang, an economist at ING NV in Hong Kong. Unless the world relax measures of social distancing after relaxing lockdowns altogether, trade flows will be disrupted, exporters will face dismal demand from the whole world.

The World Trade Organisation said last week that this year could see the worst collapse in international trade since the Great Depression. Their optimistic scenario saw a 13 per cent drop in the volume of international goods trade in 2020, worse than the 12 per cent fall during the financial crisis in 2009.

Their pessimistic scenario sees the volume of global goods trade dropping by as much as 32 per cent this year.

Policy makers across the globe have rushed to introduce stimulus to help their economies over the shutdowns and social distancing, but there is little hard evidence of a peak in infections yet. In China, the State Council has ordered more measures to stabilize trade, including building more cross-border e-commerce zones and moving the main trade fair online.

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