China’s trade performance in September was better than expected, as both exports and imports contracted at a slower pace than in previous months. According to customs data released on Friday, exports fell by 6.2% year-on-year to $299.13 billion, while imports dropped by 6.2% to $221.43 billion. Analysts had forecast a 7.6% decline in exports and a 6% fall in imports.
The trade surplus widened to $77.71 billion, up from $68.36 billion in August. China’s trade has been hit by weak global demand for Chinese goods and subdued domestic consumption amid the pandemic and the property slump. The International Monetary Fund (IMF) this week lowered its 2023 growth projection for China to 5% from 5.2%, while maintaining a global growth forecast of 3%.
China seeks to diversify its trade partners amid tensions with the US and Europe
As China faces rising tensions with the US and Europe over trade, human rights, and security issues, it has been trying to expand its trade with regional partners in Southeast Asia, as well as countries participating in the Belt and Road Initiative (BRI). The BRI is a China-led push for developing regional infrastructure such as ports and railways.
China said that its trade with BRI partner countries reached $19.1 trillion between 2013 and 2022, for an average annual growth rate of 6.4%. The third BRI forum is scheduled to be held in Beijing on Tuesday and Wednesday, with Russian President Vladimir Putin expected to attend.
China also claimed that its trains ran to 217 cities in 25 European countries as of the end of September, accounting for 8% of China-EU trade in 2022, up from 1.5% in 2016.
China faces challenges in boosting its domestic demand and innovation
Despite the better-than-expected trade figures, China still faces many challenges in reviving its economy, which has slowed down significantly in the last few months. One of the key challenges is to boost its domestic demand, which has been dampened by the pandemic, the crackdown on the tech sector, and the debt crisis of Evergrande, the country’s largest property developer.
China has been trying to shift its growth model from relying on exports and investment to consumption and innovation, but the transition has not been smooth. The government has announced some measures to support consumption, such as issuing vouchers and subsidies, but analysts say more fiscal and monetary stimulus is needed.
Another challenge is to enhance its innovation capabilities, especially in high-tech sectors such as semiconductors, biotechnology, and artificial intelligence. China faces a technological gap with the US and other advanced economies, as well as supply chain disruptions and sanctions due to the trade war. China has vowed to increase its spending on research and development and foster more homegrown talent and companies.