Opinion: The Major Shifts Affecting China’s Overseas Trade by Zhong Zhengsheng

18 Aug 2023

China’s goods exports slumped 14.5% year-on-year in July in dollar terms, while imports contracted 12.4%, marking further declines from the previous month. Weak external demand has become a significant drag on China’s economic growth, which means that the country should count more on domestic demand to ensure a stable economic recovery.

Here are some major shifts taking place in China’s foreign trade:

First, a manufacturing downturn in the U.S. and EU continued to weigh on China’s external demand, which was also hurt by weak demand from countries in Southeast Asia.

Among countries involved in the Belt and Road Initiative, which had been big recipients of Chinese exports, many turned into a drag on the country’s export growth last month.

Second, China’s export decline deepened in July due primarily to sluggish shipments of labor-intensive goods as well as mechanical and electrical products.

In terms of labor-intensive products — clothing, textiles, plastics, and bags and suitcases became major drags on exports. While exports in the category of mechanical and electrical products dropped, ships and automobiles emerged as two of the few bright spots. Exports of integrated circuits became less of a drag.

Third, price factors increasingly weighed on both exports and imports. We predict that falling global commodity prices will continue to weigh on China’s imports into September and exports into November.

Fourth, Russia stood as a key driver of China’s export growth. So far this year, Russia’s share of Chinese exports of automobiles, footwear, aircraft and furs has jumped.

Last, growth in imports of crude oil and agricultural products slowed from the previous month.