Value of China’s exports falls sharply on sliding prices

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Chinese exports fell sharply in dollar terms in March as falling prices for Chinese goods hit producers in the world’s second-largest economy.

The value of China’s exports fell 7.5 percent in March from a year earlier, while a Reuters poll of analysts forecast a 2.3 percent contraction. The value of imports fell 1.9 percent, compared to analysts’ expectations of a 1.4 percent increase.

The fall in export values ​​comes even as volumes have soared and underscores the challenges facing Beijing as it turns to industry and trade to try to pull the economy out of a deep recession induced by a slowdown in the real estate sector.

Economists said overcapacity in some sectors – particularly those favored by industrial policy, such as electric vehicles, solar panels and other areas – was driving down the cost of Chinese exports and helping them gain market share global.

“The most intense price competition is currently occurring in the high-tech area for the production of vehicles, solar panels and wind turbines. . . so this hits economies like Germany, Korea, Taiwan, Japan“, said Frédéric Neumann, HSBC’s chief economist for Asia. “What matters is volumes, and when we compare volumes from China, they are at record levels.”

Beijing faces growing accusations from the United States and Europe that its industries are overproducing, raising fears that exporters are dumping artificially cheap and subsidized goods on international markets.

China’s trading partners are calling on Beijing to boost domestic demand to fill the gap left by the real estate sector, which once accounted for nearly a third of gross domestic product.

But Chinese authorities have launched a campaign in recent weeks to reject Western claims of overcapacity, saying their exports are falling in price and gaining market share through innovation and competitiveness. China’s producer price index has fallen for 18 straight months, while consumer prices have flirted with deflation, a sign of weak demand.

“The decline in product prices is often linked to fluctuations in raw material costs, technological updates and voluntary price reductions by producers, among other factors,” said Wang Lingjun, vice minister of Administration. General of Customs, during a press conference on March 1. Numbers. “Chinese products are widely appreciated around the world due to their innovation and quality. »

The Chinese government has set what analysts describe as an ambitious target of 5% GDP growth for 2024. Beijing has announced a program aimed at boosting domestic demand with a program allowing industry to “upgrade” its equipment and consumers to purchase new devices.

The decline in export earnings in March follows a sharp increase in January and February, driven by a rebound in the electronics cycle and an increase in shipments to countries such as Russia.

German Chancellor Olaf Scholz is due to visit China next week and is expected to call on his counterparts to remove barriers for foreign companies in areas such as government procurement.

“China is gaining market share relative to other Asian exporters and perhaps relative to exports elsewhere in the world,” HSBC’s Neumann said.

The country’s low prices are beneficial to consumers around the world and will help governments combat inflationary pressures, but it means greater competitive pressure for exporters in other countries, he added.

“This disinflationary effect is exported to the rest of the region, at least on the export side,” Neumann said.

Eswar Prasad, an economist and professor of trade policy at Cornell University, said the dollar’s decline was likely due to exchange rate factors and some “ongoing weaknesses in some of China’s key overseas markets, particularly in Europe.