China's exports slump as focus shifts to domestic infrastructure projects

Thu 30 Apr 2020
Posted by: Ana Pintor
Trade News

Chinese factories have suffered a collapse in export orders for April despite the country’s exit from lockdown and the reopening of its economy, official Chinese statistics have revealed.

Chinese authorities say the coronavirus is now largely under control in the country but its major export markets in North America and Europe remain under lockdown.

The export sub-index in China’s Purchasing Managers’ Index (PMI), released today, showed the ‘health’ of export orders had dived to 33.5 in April from 46.5 in March – the sharpest fall since the global financial crisis.

PMI datasets indicate the overall health of an economy and sub-indices including GDP, inflation and exports. A score of 50 is neutral, with anything below representing a contraction and anything above indicating economic growth.

The export sub-index was backed up by the private Caixin/Markit Manufacturing PMI, also released today, which showed factory activity shrank for small and export-oriented businesses.

Infrastructure focus

Torsten Weller, a China analyst at the China-Britain Business Council, told the Daily Update (30 April) the slump in exports “was to be expected.”

He said the government has acknowledged this and is refocusing efforts on domestic infrastructure spending, especially what it calls “New infrastructure” projects including 5G networks, AI, data centres and renewable energy.

Regarding UK-China trade, he said:

“A lot of attention is still focussed on PPE procurement and other healthcare related purchases.

“However, British businesses, especially in the energy sector, advanced manufacturing, and other higher tech sectors are already monitoring the policy shift and are set to benefit from the increased in investment in modern infrastructure.”

He added that B2C businesses will “have to endure a bit longer” the impacts of the pandemic, at least until “increased government spending trickles down to Chinese retail spending.”

Overall growth

The overall PMI for China showed growth for the second consecutive month, scoring above the neutral 50 mark at 50.8 for April, following a score of 52 in March. Analysts polled by Reuters had expected a PMI reading for April of 51.

China’s economy shrank in Q1 2020 by 6.8% - its first contraction since records began over 30 years ago.