China’s exports continue to decline, adding pressure to economy

The trade surplus for the two months of this year was $117 billion.

Data for the first two months of the year is typically combined to avoid distortions from the Lunar New Year holiday, but the results for the individual months will be released later.

Overseas appetite for Chinese goods started falling in late 2022, hurting the outlook for exports and undermining what had been a key pillar of growth for China over the last two years.

“The pressure on foreign trade has increased significantly this year, mainly due to weakening external demand,” Commerce Minister Wang Wentao, said at a briefing last week. He said that many companies have reported declining orders as clients delay placing them, while the value of orders is shrinking and long-term contracts are getting shorter.

The likelihood that exports will not be able to support the economy as much as they once did has meant growth will probably need to come from elsewhere. Chinese leaders including outgoing Premier Li Keqiang have said that boosting domestic demand — consumer spending and business investment — is the government’s top priority for 2023.

So far, China’s economy has rebounded strongly after the country ended Covid Zero restrictions last year, with manufacturing activity improving last month at levels not seen in a decade, and services activity steadily climbing. The housing market has also showed early signs of stability, with home sales rising in February for the first time in 20 months.

Premier Li on Sunday announced that China would target economic growth of “around 5%” for the year. The modest target suggested that Beijing is aware of how external challenges such as falling demand may weigh on the economy, while also indicating that any large-scale stimulus is probably off the table as Beijing looks to balance growth with keeping financial risks in check.

Economists expect China’s economy to expand 5.3 percent this year, according to the median estimate in a Bloomberg survey.