China’s exports plummeted in the first two months of the year as the coronavirus epidemic disrupted global supply chains, dampened business activity, and blocked transportation and movement through the world’s second largest economy .
China’s overall exports contracted by 17.2% in dollars in January and February, more than expected by economists polled by Bloomberg. Imports fell 4%. China posted a trade deficit of $ 7.1 billion in the first two months of the year.
The slowdown in imports casts doubt that China will be able to achieve its objective in its trade agreement with the United States. China has agreed to buy $ 200 billion more in U.S. goods than it did in 2017, the baseline before the start of the trade war, over a two-year period. But imports from the United States only increased 2.5% year-over-year in January and February. Exports to the United States fell nearly 28%.
“I think it’s a typical supply shock at first glance, because imports are much better than exports. Basically, manufacturers imported the raw materials but were unable to produce and export due to the shutdown of production and logistics, “said Zhou Hao, senior emerging market economist at Commerzbank . “However, if demand cannot recover, which is likely to be the case due to the spread of the virus worldwide, imports from China would also slow in the future.”
Imports of basic products increased, with purchases of soybeans increasing by 14.2%, coal by 33.1% and iron ore by 1.5%.
The contraction in trade is mainly due to the virus epidemic and the holidays of the Lunar New Year, the Chinese customs administration announced on Saturday in a statement published on its website.
China’s trade data for January and February is normally volatile due to seasonal distortions caused by the long holidays of the Lunar New Year when businesses close and factory production and port operations are halted.
But the coronavirus epidemic has exacerbated the negative economic impact. The country has imposed draconian quarantine measures and travel restrictions over large areas of the country.
China’s dismal trade figures come after manufacturing activity plunged to a record low, indicating a massive contraction in manufacturing and services activity last month.
More than 80% of the 2,552 foreign trade companies in China have returned to work, according to a survey by the Chinese customs administration published on Saturday. However, less than a third of small and medium-sized enterprises, which employ nearly 80 percent of the Chinese workforce, are operating normally, the Ministry of Industry and Information Technology said last week.
It is the first time that China has combined the release of trade data from January and February, which is in line with the way some other important Chinese economic indicators are released at the start of the year. This decision aims to attenuate seasonal variations.
Don Weinland’s additional report in Beijing
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