China’s worse-than-expected exports in June deal fresh blow to economy

By Bloomberg News

CHINA’S exports fell for a second straight month in June, adding to the economic pain that has slowed the nation’s recovery this year.

Exports declined 12.4 percent in dollar terms in June from a year earlier, while imports dropped 6.8 percent, the customs administration said Thursday. That left a trade surplus of $70.6 billion for the month. Economists had forecast that exports would drop 10 percent while imports would shrink 4.1 percent.

Global demand had been a strong driver of Chinese growth over the past three years, although that began to fade in late 2022.

Exports have now fallen for four of the six months so far in 2023.

“External uncertainties are rising, and the global economy’s weak momentum and outlook of slowing growth is not improving yet,” said Bruce Pang, chief economist and head of strategy for Greater China at Jones Lang LaSalle Inc.

“The impact from unleashing earlier pent-up orders is basically gone,” although exports of goods such as electric cars and batteries continue to improve, he said.

The weakness in export demand was widespread. Exports to the US fell almost 24 percent, the 11th straight month of declines and the worse result since the slump at the beginning of the pandemic.

Shipments to Asean, South Korea, Japan, Taiwan, Germany, Italy, the UK, the Netherlands and Canada all fell by double digits, and shipments to France were also down.

China’s shares rose on Thursday as Asia equities broadly gained.

The mainland’s benchmark CSI 300 Index climbed 1.1 percent as of the mid-day break, while Chinese shares traded in Hong Kong increased 2.5 percent. The offshore yuan was little changed at 7.1689 per dollar as of 12:40 p.m. local time.

Unbalanced trade

THE import data underscores the weakness of the domestic economy. Demand in China for electronic parts from Taiwan and South Korea, along with commodities from elsewhere, is still down. Soybean, copper ore and concentrated copper, iron ore and natural gas imports all fell from May.

That has left the nation’s trade increasingly unbalanced, with the surplus in the first six months at a record for that period in data back through the late 1990s.

“The deeper decline in China’s exports in June drives home a painful message—a global economy that’s weakening won’t offer much support for China’s struggling recovery. A bigger drop in imports highlights weakening domestic demand—and the need for forceful policy support,” said Bloomberg economist Eric Zhu.

“The weakening external demand continues to impact China’s trade,” said Lyu Daliang, spokesman of the General Administration of Customs. “The global economy’s recovery is lacking a driver. Global trade and investment is slowing, while unilateralism, pro -

IMF approves much-awaited $3 billion bailout

By Munir Ahmed

The Associated Press

ISLAMABAD—The International Monetary Fund on Wednesday approved a muchawaited $3 billion bailout for Pakistan, the global lender said, a move that’s likely to save the nation from defaulting on its debt repayments.

The IMF said its executive board approved an agreement to release the funds over nine months to support Pakistan’s economic stabilization program.

The announcement comes less than two weeks after Pakistan and the IMF agreed to the plan following meetings with Prime Minister Shehbaz Sharif, Finance Minister Ishaq Dar and other officials.

“The arrangement comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers” in the fiscal year 2023, the IMF said in a statement.

Sharif quickly welcomed the IMF decision, saying it was a major step forward in the government’s efforts to stabilize the economy and achieve macroeconomic stability.

“It bolsters Pakistan’s economic position to overcome immediate to medium-term economic challenges, giving the next government the fiscal space to chart the way forward,” he said in a tweet. “This milestone, which was achieved against the heaviest of odds & against seemingly impossible deadline, could not have been possible without excellent team effort.”

The bailout had been on hold since December when the IMF refused to release a critical $1.1 billion part of the loan because of the country’s lack of compliance with a 2019 agreement signed between the IMF and former Prime Minister Imran Khan.

A breakthrough was announced recently after Sharif met with IMF head Kristalina Georgieva in Paris at the Summit for a New Global Financing Pact to discuss the revival of the $6 billion bailout package amid shrinking foreign exchange reserves and increasing inflation, which resulted in an increase in food costs.

Sharif has been trying to overcome the economic crisis since he came into power after Khan was ousted in a no-confidence vote in parliament in April 2022. Pakistan’s economy witnessed a major shock last summer when devastating floods killed 1,739 people, destroyed 2 million homes and caused $30 billion in damage.

“Things are now moving in the right direction,” said Dar, the finance minister Wednesday.

According to analysts, Pakistan needs at least $20 billion in the next two years to pay back foreign loans with interest. However, ear - tectionism and geopolitical risks are rising.”

The government is looking to increase stimulus to support domestic growth—and the trajectory of global demand through the rest of the year will be an important factor for Beijing to determine how much help is needed.

However, with global growth looking to be slowing and many central banks still raising interest rates to push down inflation, it’s unlikely that authorities can count on export demand to pull China through the downturn.

“The latest data in developed countries show consistent signals of further weakness which will likely put more pressure on China’s exports in the rest of the year,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd. “China has to depend on domestic demand—the big question in the next few months is whether domestic demand can rebound without much stimulus from the government.” With assistance from Fran Wang and Yujing Liu/Bloomberg