As the world’s largest exporter, China’s growth depends less on its internal conditions than on events in the United States and Europe. 

And because China supplies goods heavily elsewhere in Asia. Such places like South Korea and Taiwan have reflected China’s export issues.

The overall image coming out of this interaction indicates a slowdown, if not a recession.

The latest message from S&P Global’s world purchasing managers’ index (PMI) is weakness. 

Its total manufacturing and service activity index dropped to 49.3 in August. 

That is down from 50.8 recorded in July and under the 50 mark that distinguishes between expansion and contraction.

Chinese exports reflect the global slump. According to Beijing’s General Administration of Customs, general goods exports in August were $314.9 billion, only 7.1% above year-ago levels.

The August number was the worst since last spring’s lockdown-oppressed performance.

Part of the shortage comes from production interruptions within China caused by drought, heat waves, and occasional power outages. 

All these problems have put a hitch in that economy’s great export machine. 

COVID lockdowns, though less severe than earlier in the year, have also disrupted goods and services flows. 

Reuters reported that according to  Japanese brokerage and investment bank Nomura, as of September 6, 49 cities in China face lockdowns or various levels of unique controls.

But primarily, China’s export shortfall reflects factors of faraway origin—from the United States and Europe. 

The once-powerful post-COVID revival has run its course in the U.S. and Canada. 

Chinese exports to the U.S. fell 3.8% in August, a complete change from July’s 11% increase. 

Europe, China’s most significant export market, is experiencing a severe economic slowdown due to the soaring price of energy as Russia restricts the flow of all-important natural gas to the EU.

Unlike the outright fall in exports to the U.S., Chinese sales in Europe increased in August, but the 11.1% increase over year-ago marks was sharply down from July’s 23.1% gain.

China’s downturn has spread because its exports depend heavily on a flow of components from other parts of Asia. 

South Korea’s semiconductor exports to China decreased in August for the first time since April 2020 at the peak of the pandemic. 

Taiwan shipments to China decreased by 9% in August, below the same month last year.

There is reason to expect relief from China’s heatwave, its drought, and the electricity shortages, but not in the scarcity coming out of North America and Europe. 

Indeed, Central banks in Canada, the U.S., and Europe have raised interest rates and otherwise tightened monetary policy to regain control of inflation.

There is every reason to consider still more constrained economic conditions in these critical markets for China, as well as more negative spillover effects elsewhere in Asia.

Sign up to receive our latest news!

By submitting this form, I agree to the terms.