China's trade slump eases, but pandemic to deepen export downturn

The plunge in China's exports and imports eased in March as factories resumed production, but shipments are set to shrink sharply over coming months as the coronavirus crisis shuts down many economies and puts the brakes on a near-term recovery.

Financial markets breathed a sigh of relief after customs data on Tuesday showed overseas shipments fell 6.6% in March year-on-year, improving from a 17.2% slide in January-February, as exporters rushed to clear a backlog of orders after forced production shutdowns.

Economists had forecast shipments to drop 14% from a year earlier.

Yet, while the trade figures were not bad as feared, analysts say the export and overall growth outlook for the world's second-biggest economy remains grim as the pandemic has brought business activity across the globe to a standstill.

"The above-expectation March trade figures do not mean that the future is carefree," said Zhang Yi, Beijing-based chief economist at Zhonghai Shengrong Capital Management.

Zhang said he expects first-quarter gross domestic product data on Friday will likely show a contraction of 8% - the first quarterly slump since at least 1992. Analysts' forecasts for China's first quarter GDP ranged widely between a contraction of 2% and 16%.

The data showed imports slid 0.9% from a year earlier, also above market expectations of a 9.5% drop, which the customs attributed to improving domestic demand. They had fallen 4% in the first two months of the year.

The better imports picture partly reflected shipments that were stuck in ports being cleared and catch-up demand as authorities eased restrictions. Yet, domestic consumption was far from robust with key imports such as iron ore dipping in March, underlining the broad economic strains.

The overall trade surplus last month stood at $19.9 billion, compared with an expected $18.55 billion surplus in the poll and a deficit of $7.096 billion in January-February.

China, where the novel coronavirus first emerged late last year, has reported 82,249 infections and 3,341 deaths as of April 13. Worldwide, infections have surpassed 1.8 million with over 119,000 deaths.

The pandemic's sweeping impact on businesses and consumers has triggered an unprecedented burst of stimulus from policymakers in the past two months, with the World Trade Organization forecasting that goods trade would shrink more steeply this year than during the global financial crisis.

UBS Economist Tao Wang predicted that exports would decline by 20% on-year in the second quarter and 12% for the whole of 2020.

Wenzhou Juna Shoe Industry Co, which used to export 90% of its leather shoes to Russia, South Korea and Australia, had 30% of its orders cancelled last month, with clients delaying the shipments of another 20%, according to a report from China Central Television (CCTV) on Sunday.

Half of its production lines were suspended overnight, said CCTV, citing the company manager Wan Jiayong.