China’s Export Machine Still Hums Despite Covid-19, Extreme Weather

That marked a retreat from June’s 32.2% year-over-year gain, but was largely in line with the 20% growth forecast by economists polled by The Wall Street Journal. To some degree, the slower year-over-year percentage advance reflects a tapering off of flattering comparisons to the pandemic-hit economic figures early last year.

Slowing growth in exports, a key pillar of China’s post-Covid-19 recovery, hasn’t been unexpected. If anything, predictions of an end to the sustained exports boom that began in the spring of 2020—when the world’s second-largest economy cranked out medical equipment and work-from-home computer equipment for the rest of the world—have been constant for months.

But China’s export machine has continued to hum in defiance of those predictions, notching up month after month of yearly double-digit percentage growth figures.

July’s robust export growth number came despite unforeseen catastrophes, including record flooding and heavy typhoons in central and eastern China, which added to challenges for manufacturers already grappling with higher-than-usual costs for logistics and raw materials.

“The gradual recovery of the global economy has boosted the demand for international trade, which is conducive to the growth of China’s exports,” Li Kuiwen, a spokesman for China’s customs office, said Saturday.

China’s export outperformance hasn’t stopped forecasters from continuing to spot signs of impending weakness. Some have pointed to leading indicators in recent data releases showing, for instance in the monthly purchasing manager’s index, sluggish new export orders—suggesting that the sector may finally weaken in coming months.

Meantime, the Delta variant is spreading quickly across China, forcing authorities to again deploy its economically costly “Covid zero” strategy: locking down cities, quarantining confirmed infections and tightening restrictions on international travel.

Those strict epidemic controls have disrupted operations of both the manufacturing and service sectors, prompting economists to downgrade their third-quarter and full-year economic growth outlooks.

On Thursday, Morgan Stanley economists slashed their forecast for China’s growth in 2021 to 8.2%, from a previous target of 8.7%, citing the fast spread of the Delta variant.

“Exports and the Covid outbreak are the main sources of uncertainty in China for the next few months,” noted Zhang Zhiwei, chief economist at Pinpoint Asset Management.

Officials, too, have acknowledged the still-substantial challenges facing the Chinese economy.

In a Politburo meeting last month, the Communist Party’s top decision-making body signaled a potential shift back to more dovish fiscal policies amid the increasing headwinds. Still, expectations for major stimulus are relatively subdued, with China’s economy comfortably on track to hit policy makers’ full-year growth target of 6% or more.

In an article published Friday, Ning Jizhe, deputy director of China’s main economic-planning agency, the National Development and Reform Commission, warned that domestic demand growth was struggling with weaker momentum.

That gloomy picture was borne out to some degree by Chinese import data that were also released Saturday, showing imports rising 28.1% in U.S. dollar terms in July from a year earlier—short of June’s 36.7% pace, and economists’ median forecast of 31.7%.

Compared with 2019, a metric that Chinese officials have used to offset the distortions of the pandemic, imports and exports grew by 22.3% in the first seven months of the year, Chinese customs officials said Saturday.

Taken together, China’s trade surplus expanded to $56.6 billion in July, from $51.5 billion in June, according to official data. Economists had expected China’s trade surplus to come in at about $54 billion.

—Bingyan Wang contributed to this article.

Write to Jonathan Cheng at [email protected]