China faces economic challenges as export weakness emerges ahead of US election

In an article published by Business Insider, China's economic landscape is facing increasing challenges, with recent data indicating a worrying trend in exports and imports just as the US presidential election approaches.

In September, China exported goods worth $303.7 billion, a 2.4 per cent increase compared to the previous year, according to official data released Monday. However, this growth fell short of market expectations, which anticipated a 6 per cent rise based on a Reuters poll of economists.

This marks the lowest growth in five months and is a significant slowdown from the 8.7 per cent increase reported in August. The decline was widespread, with exports to both Japan and South Korea decreasing year-on-year. Shipments to the US and EU saw modest growth of just 2.2 per cent and 1.2 per cent, respectively. Economists attributed this slowdown to declining external demand.

Lu Daliang, a spokesperson for China's General Administration of Customs, noted during a Monday press conference that the deceleration in export growth was influenced by adverse weather, logistical challenges, and a high comparative base from last year. Nevertheless, Nomura economists remarked that the extent of the decline was "clearly larger than expected." September's export figures raise concerns as they highlight the impact of weak consumer confidence in China.

 While international demand has provided some support for exports, the second-largest economy is grappling with several challenges, including a property crisis, high youth unemployment, and deflation, suggesting that more obstacles may lie ahead.

"Although a single month's data isn't enough to establish a trend, persistent weakness in exports would indicate that China is losing a crucial safeguard against declining domestic demand," wrote economists at BofA Securities. China's imports for September also fell short of projections, increasing by only 0.3 per cent year-on-year, which is slower than the 0.5 per cent rise seen in August. The timing of this export decline is particularly problematic, occurring just weeks before the US presidential election.

Republican candidate Donald Trump announced in February that he would impose tariffs exceeding 60 per cent on Chinese goods if he wins. This year, both the US and the EU have already raised tariffs on Chinese imports, including electric vehicles, citing concerns over dumping and unfair trade practices that they claim harm their economies.

China has rejected these allegations, arguing that they are protectionist measures aimed at stifling its economic growth. Economists anticipate that Beijing will introduce additional measures to support growth, which it aims to maintain at around 5 per cent this year. Authorities announced aggressive monetary stimulus in late September, though many analysts believe it may not be sufficient to revitalize China's struggling economy. 

China's finance ministry indicated the possibility of more fiscal stimulus during a press conference, though it did not specify the amount, leaving markets uncertain. Significant measures may be delayed until later in the year, as Beijing appears focused on "gradually establishing a floor" for the economy rather than implementing an abrupt surge in stimulus, according to Rory Green, the chief China economist at GlobalData.

Green noted that China may be withholding economic stimulus in anticipation of the US presidential election, aiming to preserve its options in the event of a Trump victory, which could result in a 60 per cent tariff on all Chinese exports to the US.

"This scenario places pressure on Beijing to conserve its stimulus capacity in case it needs to drive growth in 2025," he explained in a separate note from September.

By Naila Huseynova