According to analysts, there are multiple factors, including an internal clampdown on riskier lending practices, slowdown in global economy and U.S. trade action, because of which the Chinese economy is cooling down.
In February 2019, in what is possibly as a result of U.S. trade action against China, Beijing’s exports have dipped significantly in comparison to the last three years; imports have also fallen by a third straight month. Significantly, this is despite Beijing’s supportive measures, thus indicating that its economy is likely to slowdown further in the coming months.
China’s major trading partners, as well as global investors, are keenly watching to see how quickly its economy is cooling following a slowdown in growth which touched its 30-year-low in 2018.
According to customs data, in February 2019, China’s exports have fallen by 20.7% from a year earlier, while imports dipped by 5.2% from a year earlier. The fall in exports marks its largest decline since February 2016.
Economists had expected a 4.8% drop in exports after January’s 9.1% rise; they had also expected a 1.4% fall widening from January’s 1.5% drop. As a result, China’s trade surplus in February was $4.12 billion for the month, much smaller than the $26.38 billion forecast.
Analysts have warned that this data should be read with caution due to business disruptions caused by the long Lunar New Year holidays, which came in mid-February in 2018 but started on February 4 this year.
Earlier this week on Wednesday, U.S. President Donald Trump had stated trade negotiations with China were moving along well and said there would either be a “good deal” or no deal at all.
Of relevance is the fact, before the U.S-China trade war escalated, China’s economy was already slowing, partly due to a clampdown on riskier lending that starved smaller, private companies of financing and stifled investment.