Stay informed with free updates
Just sign up to Chinese trade myFT Digest: delivered straight to your inbox.
China’s exports fell sharply in dollar terms in March as lower prices for Chinese goods hit manufacturers in the world’s second-largest economy.
The value of China’s exports fell 7.5% in March from a year earlier, compared to a poll by Reuters analysts that had forecast a contraction of 2.3%. The value of imports fell 1.9%, compared to analysts’ expectations of a 1.4% increase.
The drop in the value of exports comes just as volumes are rising sharply and underlines the challenges Beijing faces as it turns to manufacturing and trade to try to lift the economy out of a deep crisis induced by slowdown in the real estate sector.
Economists have said that excess capacity in some sectors – particularly those favored by industrial policy, such as electric vehicles, solar panels and other sectors – is reducing the cost of China’s exports and helping it gain global market share.
“The most intense price competition is seen precisely in the high-tech sector for the production of vehicles, solar panels and wind turbines. . . so it is affecting economies like Germany, Korea, Taiwan, Japan“,” said Frederic Neumann, chief Asia economist at HSBC. “What matters is the volumes, and when we compare the volumes coming from China, they are reaching record levels.”
Beijing is facing growing accusations from the United States and Europe that its industries are oversupplied, raising fears that exporters are dumping artificially cheap and subsidized goods on international markets.
China’s trading partners are calling on Beijing to stimulate domestic demand to fill the gap left by the real estate sector, which once accounted for nearly a third of gross domestic product.
But in recent weeks Chinese officials have launched a campaign to reject Western claims of overcapacity, saying their exports were falling in price and gaining market share due to innovation and competitiveness. China’s producer price index has fallen for 18 consecutive months, while consumer prices have come close to deflation, a sign of weak demand.
“The decline in product prices is often linked to fluctuations in raw material costs, technological upgrades and voluntary price reduction by manufacturers, among other factors,” said Wang Lingjun, vice minister of the General Administration of Customs , during a press conference on March 24. numbers. “Chinese products are widely appreciated globally due to their innovation and quality.”
The Chinese government has set what analysts describe as an ambitious GDP growth target of 5% for 2024. Beijing has announced a program to stimulate domestic demand with a program for the industry to “modernize” its equipment and for consumers to purchase new appliances.
The decline in March export revenue follows a sharp increase in January and February, driven by a recovery in the electronics cycle and higher shipments to countries such as Russia.
German Chancellor Olaf Scholz will visit China next week and is expected to call on his counterparts to break down barriers for foreign companies in sectors such as public procurement.
“China is gaining market share against other Asian exporters and perhaps against exports in other parts of the world,” said HSBC’s Neumann.
The country’s low prices are good for consumers around the world and will help governments fight inflationary pressures, but mean greater competitive pressure for exporters in other countries, he added.
“The 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 decline in dollar terms was likely due to exchange rate factors and some “persistent weaknesses in some of China’s major foreign markets, particularly in Europe”.