China’s imports fall in April as clouds gather for economic outlook

China’s import volume posted its biggest contraction in a year last month, while exports expanded at a slower pace than expected, casting doubt over the pace of the country’s economic recovery after three years of pandemic restrictions.

Imports fell 7.9 per cent year on year in April, a far deeper decline than analysts’ expectations of a 0.2 per cent contraction, according to a Bloomberg poll. Exports in the month rose 8.5 per cent compared with a year earlier, following an unexpected jump in March and benefiting from a low base last year.

Tuesday’s mixed trade data release was closely watched across markets for clues on the state of China’s economy, which has thrown off conflicting signals as it emerges from three years of closure under anti-coronavirus rules.

Gross domestic product expanded 4.5 per cent in the first quarter of the year and exports expanded after months of weakness, while tourism over a recent national holiday surpassed pre-pandemic levels for the first time.

But factory activity figures released last week showed signs of sluggishness and authorities have warned of an incomplete recovery as global demand for goods waned.

The renminbi fell 0.2 per cent against the dollar on Tuesday following the publication of trade data to Rmb6.9254. In Hong Kong, losses for the Hang Seng China Enterprises index sharpened, leaving the benchmark down 2.1 per cent.

Hao Zhou, chief economist at Guotai Junan International, said the trade figures and the import data in particular were “somewhat downbeat” and suggested they pointed to slowing growth momentum in the second quarter.

Beijing has set a cautious growth target of 5 per cent for the full year, its lowest in decades, after missing a 5.5 per cent target in 2022 when economic growth came in at just 3 per cent under the impact of onerous Covid-19 restrictions and outbreaks of the virus in the country’s biggest cities.

Economists have widely pointed to an export slowdown in 2023 as one of the biggest challenges facing Chinese policymakers, given high global inflation and weakness in consumer demand.

In March, exports unexpectedly surged 15 per cent after several consecutive months of declines, while imports contracted 1.4 per cent, beating expectations of a 5 per cent decline.

The 8.5 per cent rise for exports last month came against a low base compared with a year earlier, when Shanghai was plunged into a multi-month lockdown that weighed heavily on economic activity.

Capital Economics estimated that after adjusting for price changes and seasonality, export volumes fell 4.4 per cent in April compared with March, reversing the strength of the previous month’s figure.

“This suggests that global demand for Chinese goods remains weak,” wrote China economist Zichun Huang.

Zhiwei Zhang, president at Pinpoint Asset Management, suggested the contraction of imports in April may have been partly driven by the slowdown in global consumption, which affects China’s imports of parts and components which are then processed and exported.