China’s Export Growth Expected to Reverse Course, Heading Towards Contraction in March

A Reuters poll released on Thursday suggests that China’s exports likely experienced a downturn in March, following a period of better-than-expected growth in the first two months of the year. The anticipated trade data for March indicates a 2.3% year-on-year contraction in outbound shipments, a reversal from the 7.1% increase recorded during the January-February period.

This projected decline contrasts with the strong external shipments reported in the manufacturing purchasing managers’ index (PMI) surveys for the previous month. However, it aligns with analysts’ expectations for a significant pullback in China’s overall export growth due to the higher comparison base from the previous year. A note from Citi earlier this month highlighted a 6.2% year-on-year decline in the deadweight tonnage of ships in 20 major ports during March 1-30, further supporting this outlook.

In March of the previous year, exports unexpectedly surged; however, the customs administration later revised down the value of March exports by a considerable margin in 2023. Throughout much of last year, Chinese exporters encountered challenges due to subdued overseas demand and tight global monetary policies.

While China’s economy exhibited a relatively solid start in 2024, driven by support measures implemented by policymakers to stimulate household consumption, private investment, and market confidence, growth remains uneven. Analysts anticipate that a full-scale recovery may be delayed, primarily due to the prolonged crisis in the property sector. Additionally, official data released on Thursday indicates that consumer inflation cooled more than anticipated in March, signaling sluggish demand conditions.

Concerns among Western nations regarding China’s overcapacity in certain industries may also lead to heightened trade barriers for the world’s manufacturing hub, further complicating the economic landscape.

The poll suggests that China’s imports likely increased by 1.4% in March, a slower pace compared to the 3.5% gain observed in the first two months of the year combined. South Korean exports to China, considered a leading indicator of Chinese imports, saw a modest 0.4% year-on-year rise in the same month, indicating tepid domestic demand in China.

The median estimate from the poll anticipates that China’s trade surplus will amount to $70.2 billion. The official data is scheduled for release on Friday.