Beijing's Forbidden City. (Photo by Noel Celis / AFP) (Photo by NOEL CELIS/AFP via Getty Images)
Recently this column looked behind China’s strong first quarter growth report and saw evidence of considerable economic weakness. Now import-export news for April, confirms the skepticism about that seeming strength.
April data on Chinese imports of goods and services shows them some 7.9 percent below year ago levels. Imports from South Korea, considered a bell weather of future activity, fell a whopping 26.5 percent. Exports grew, something of a surprise given how weak the American and European markets are, but at 8.5 percent above year-ago levels, they still exhibited a marked deceleration from March’s 14.8 percent advance.
Weak imports tell a two-part story about China’s immediate economic troubles. The first tells of the woes of the Chinese consumer. Though China has been characterized as the “workshop of the world,” a large portion of its consumer goods nonetheless flow in from abroad. With that flow clearly in decline, it looks increasingly as though the so-called “revenge spending” among consumers that had so lifted the first quarter’s GDP figure is neither as broad-based nor as durable as enthusiasts have claimed. It was apparent even a month ago that this spending surge concentrated mostly on luxury goods, especially high-end consumer services. These import figures confirm that such lavish spending has failed to extend to the vast majority of lower- and middle-income Chinese.
The second part of the story tells of Chinese business activity. Much of Chinese business, especially the country’s much-praised export machine, depends on imported parts and components. A general drop in imports suggests that these factories and workshops are less active than they might be, especially if the economic recovery were proceeding as Beijing hopes it will. Noteworthy in this regard is the 15.3 percent drop in semiconductor imports. Electronics assembly remains a large part of Chinese business, and this figure says it is far from booming. Reinforcing this picture is Beijing’s open concern over the negligible growth in private business investment. At last measure, it showed a mere 0.6 percent increase from year-ago levels.
The news on exports is less dramatic but hardly upbeat. On this front, even the statistics ministry issued a warning when it released its GDP figures a few weeks ago, saying, “the situation abroad is still complex and volatile, inadequate domestic demand remains prominent, and the foundation for economic recovery is not solid yet.” Not only did the pace of export growth suffer a sharp deceleration, but April also brought news of a steep decline in export orders from Beijing’s official manufacturing purchasing managers’ report. With central banks in Europe and America raising interest rates to fight inflation, and the prospect of recession in both these important economic regions, there is little reason to look for a positive change in this picture any time soon.
Set against the backdrop of this news, Chinese economic prospects look less uplifting than they did (at least to some) only a few weeks ago. Especially if the United States and/or Europe fall into recession, far from unlikely, Beijing will have trouble meeting its already reduced 5.0 percent real growth target for 2023.
