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China’s exports on the up but outlook is cloudy as global growth cools

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Shanghai, China, where construction has slowed. Photo: Qilai Shen/Bloomberg

Shanghai, China, where construction has slowed. Photo: Qilai Shen/Bloomberg

Shanghai, China, where construction has slowed. Photo: Qilai Shen/Bloomberg

China’s export growth unexpectedly picked up speed in July, offering an encouraging boost to the economy as it struggles to recover from a Covid-induced slump.

But weakening global demand could start to drag on shipments in coming months.

Exports rose 18pc in July from a year earlier, the fastest pace this year, official customs data released yesterday showed, compared with a 17.9pc increase in June and beating analysts’ expectations for a 15pc gain.

Outbound shipments have been one of the few bright spots for the Chinese economy in 2022, as widespread lockdowns hit businesses and consumers hard and its once-mighty property market lurches from crisis to crisis.

“China’s export growth surprised again on the upside. (It) continues to help China’s economy in a difficult year as domestic demand remains sluggish,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

However, many analysts have expected exports to fade as the global economy looks increasingly likely to be heading into a serious slowdown, weighed down by soaring prices and rising interest rates.

A global factory survey released last week showed demand weakened in July, with orders and output indices falling to their weakest levels since the onset of the pandemic in early 2020.

China’s official manufacturing survey indicated activity contracted last month, raising fears that the economy’s recovery from lockdowns in spring will be slower and bumpier than expected. But there were signs that transport and supply-chain disruptions caused by Covid restrictions were continuing to ease, just in time for shippers preparing for peak year-end shopping demand.

Foreign trade container throughput at eight major Chinese ports rose 14.5pc in July, compared to an 8.4pc gain in June, according to data from the domestic port association. Container throughput at Covid-hit Shanghai port hit a record high last month.

July exports may also have been buoyed by pent-up demand from south-east Asia as supply snarls eased and factories there ramped up production, Jones Lang LaSalle’s chief economist and head of research Bruce Pang said in a research note.

Amid negative real interest rate and surging inflation, some European and US customers may have frontloaded orders to ensure they had goods on hand with lower costs, he added.

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