China’s Global Exports Drop 1st Time in 7 Years, Exports to US Tumble 13 Percent

People are seen on screens from closed circuit television security cameras at the World Artificial Intelligence Conference in Shanghai, China, on July 6, 2023. (Wang Zhao/AFP via Getty Images)

Exports from China dropped by nearly 5 percent in 2023 as demand from Western nations waned over the past year, with the United States leading with a 13 percent decline.

China’s exports for 2023 totaled $3.38 trillion measured in dollar terms, which is down 4.6 percent compared to the previous year, according to Chinese customs data cited by media outlets. The 4.6 percent decline comes after exports surged by 7 percent in 2022. Beijing saw a fall in exports last time in 2016 when it decreased by 7.7 percent. Chinese shipments grew during the COVID-19 pandemic as consumers in Western nations splurged under lockdown. But as demand from the United States and Europe waned over the past year due to rising interest rates, Chinese exports cooled down.

Beijing’s exports to the United States saw the largest decline, falling 13 percent in 2023. Exports to Southeast Asia and the European Union also fell. A notable exception to the trend was Russia, with Chinese exports jumping 47 percent.

The decline in exports was led by a double-digit fall in commodities, including aluminum and rare earths. Automobile and auto parts saw a 27 percent increase.

“The global economic recovery has been weak in the past year,” Lyu Daliang, a spokesperson for the General Administration of Customs, said during a press conference in Beijing on Friday, according to CNN. “Sluggish external demand has hit China’s exports.”

He foresees China’s exports to continue facing “difficulties” amid weak global demand this year. In addition, “protectionism and unilateralism” will also negatively affect exports.

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Exports saw a 2.3 percent increase in December 2023, mostly due to higher demand for automotive and auto parts. However, analysts do not see this positive momentum lasting for long, as the growth was driven by discounts from exporters seeking to gain market share.

“Without the support of price cuts, exporters will find it more difficult to share off the post-pandemic pullback in global goods demand,” Julian Evan-Pritchard, head of China Economics at U.K. research firm Capital Economics, told Nikkei Asia.

The positive December 2023 export numbers are compared to a year ago when exports from China tumbled due to COVID-19 infections rising across the nation. As such, the lower December 2022 export numbers have contributed to making the most recent December data appear stronger.

“Looking ahead to 2024, the complexity, severity, and uncertainty of the external environment is increasing. To further promote stable growth in foreign trade, some difficulties should be overcome and more effort is needed,” said Wang Lingjun, deputy head of the General Administration of Customs, according to South China Morning Post.

China’s Struggling Economy

The fall in exports comes as China’s economy is struggling. During this year’s New Year address, Chinese Communist Party leader Xi Jinping admitted that “some enterprises had a tough time” and that “some people had difficulty finding jobs and meeting basic needs.”

Before the pandemic, China’s GDP grew from around 6 percent to 7 percent. Growth fell to 2.24 percent in 2020 and recovered to 8.45 percent in 2021. However, GDP declined to 2.99 percent in 2022.

While China is estimated to have grown by around 5 percent in 2023, its manufacturing sector has been decelerating. In December, China’s purchasing managers index (PMI) contracted for the third straight month.

“Slowing economic growth in China and the government’s evolving policy response will continue to result in headwinds for performance over 2024 in several sectors across greater China,” Lan Wang, senior director at Fitch Ratings, said in a recent note.

“[And, while] the Chinese government indicated recently that policy measures next year will prioritize development, the efficacy of the measures will be instrumental to curb downside risks to economic growth, which Fitch Ratings forecasts to slow to 4.6 percent in 2024 from 5.3 percent in 2023.”

In a Dec. 14 press release, the World Bank said that while China’s economic activity picked up in 2023, its economic performance has been “marked by volatility, ongoing deflationary pressures, and still weak consumer confidence.” It projected GDP growth to slow to 4.5 percent this year.

“The outlook is clouded by continued weakness in the real estate sector and persistently tepid global demand in the short term, as well as structural constraints to growth, including high debt levels, population ageing, and slower productivity growth than in the past,” the World Bank said.

“The economic outlook faces significant risks. The property sector downturn may extend beyond initial expectations, impacting consumer sentiment and spending. This, in turn, could put pressure on suppliers, creditors, and local government revenue, and lead to a decrease in public investment.”

Moreover, China’s economy is also vulnerable to rising geoeconomic tensions and softer global demand, it stated.

China is also facing deflationary pressure, with its November inflation registering the largest drop in three years. In addition, producer price inflation has been negative for over a year.

If prices continue declining, it poses a major threat to the Chinese economy as businesses will avoid investments due to worries about more price declines in the future. If China gets trapped in a deflationary spiral, it will lead to lower wages and higher unemployment.