China’s Exports Slump as Virus Shutdown Slashes Trade, Demand

(Bloomberg) -- China’s exports fell more than expected in the first two months as the coronavirus outbreak led to an extended lunar new year holiday, depressed factory output and blocked transport and movement across the country. Imports also declined.

  • Exports dropped 17.2% in dollar terms in January and February from a year earlier, while imports fell 4%, the customs administration said Saturday. That left a trade deficit of $7.1 billion for the first two months. Economists had forecast that exports would decline by 16.2% while imports would drop by 16.1%.
  • It is the first time that customs has combined the data for the first two months of the year, and not released data just for January.
Cumulative trade in the first two months of the year (change from previous year)

Key Insights

  • The first two months are normally volatile for China’s economic activity due to a week-long lunar new year holiday, and this year is more unusual due to the coronavirus epidemic. The holiday, as well as quarantine and containment measures, shut down much of the economy for weeks, disrupting travel, production, and transport. The government is now pushing companies to restart, but the economy is still struggling to return to pre-virus levels.
  • The disruption may also jeopardize China’s ability to meet its commitments to the U.S under the terms of the trade deal signed in January. China agreed to increase its imports of U.S. goods and services by $76.7 billion over the level in 2017 in the first year of the deal, and then by $123.3 billion in the second year, increasing imports by a total $200 billion
  • “China’s trade activities may get back to normal gradually by end-March or early second quarter,” Ning Zhang, senior economist at UBS Group AG in Hong Kong said ahead of the data release. “The downside indeed comes from a wider spread of coronavirus globally or a pandemic in the coming quarters, which could weigh on global demand and China’s exports.”
  • The virus outside China means the global supply chain would still be broken even if China restarts operations, according to Iris Pang, an economist with ING Bank NV in Hong Kong. “It is March and April data that is now more important. And they should look bad as the coronavirus is spreading around the world.”

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  • Contraction in trade in the first two months was mainly due to the virus outbreak and extended lunar new year holiday. The impact on the imports is not yet significant, according to a statement on the Custom’s website.

©2020 Bloomberg L.P.

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