China's exports unexpectedly rose in April for the first time this year, taking some pressure off manufacturers in the world's second-largest economy after the coronavirus pandemic battered demand and disrupted manufacturing supply chains. April's better-than-expected outcome followed an improvement in March, but the outlook for China's exports remains bleaks as the health crisis around the world is sparking fears of a global recession. Slowing global growth and mounting job losses will likely dampen demand for Chinese goods for months to come.
Overseas shipments in April rose 3.5% from a year earlier, marking the first positive growth since December last year, customs data showed on Thursday. That compared with a 15.7% drop tipped by a Reuters poll of economists and a 6.6% plunge in March. The sharp fall in China's exports and imports earlier in the year eased in March as factories resumed production, but analysts expect pressures to persist as the coronavirus crisis shuts down economies around the world.
"April shipments may have been boosted by exporters making up for shortfalls in the first quarter due to supply constraints then," Louis Kuijs of Oxford Economics said in a note. "(But) in any case, as heralded by the weakness of new export orders in the PMIs, exports should weaken significantly in the near term as China's key trading partners fall into deep recession, although our baseline forecast sees global demand recovering in the second half."
Imports sank 14.2% from a year earlier, the biggest contraction since January 2016 and below market expectations of an 11.2% drop. They had fallen 0.9% the previous month. The soft imports reading was due to weak domestic demand and declines in commodity prices. The shutdowns outside China also dealt a heavy supply shock to the country's importers.
China's trade surplus for the period stood at $45.34 billion, compared with an expected $6.35 billion surplus in the poll and a surplus of $19.93 billion in March. Both official and private factory surveys for April showed sub-indexes for export orders scaled back sharply, suggesting stronger external headwinds even as some countries have eased lockdowns.
With the coronavirus under control domestically, China's economy has begun to open up again as authorities loosen draconian restrictions including stay-at-home orders. But many factories are grappling with slashed or cancelled overseas orders after reopening as global demand remains tepid. Many are faced with rising inventory and falling profits, and some have let workers go as part of cost-cutting efforts.
Shaking off optimism of an immediate recovery, many economists have slashed their trade outlook for the near future. "We expect export growth to slump further to -30.0% in Q2 from -13.3% y-o-y in Q1 and real GDP growth to remain negative at -0.5% y-o-y in Q2," said analysts with Nomura in a research note prior to the data release.