In July, China’s imports and exports declined far more quickly than anticipated, endangering growth prospects in the second-largest economy in the world and increasing pressure on the government to introduce new stimulus measures to boost demand.

Customs statistics revealed on Tuesday that imports fell 12.4% in July compared to the same month last year, missing the 5% decline predicted in a Reuters poll. Exports fell by 14.5%, more than the predicted 12.5% reduction and the 12.4% drop from the previous month.

The biggest drop in inbound shipments since January occurred as a result of COVID infections closing down businesses and industries and stifling local demand.

Due to weaker demand at home and abroad, the economy expanded slowly in the second quarter, forcing top officials to pledge additional policy support and analysts to lower their growth projections for the year.

With worse activity in the construction, manufacturing, and services sectors, foreign direct investment, and industrial profits, poor imports and exports are the most recent indication that third quarter growth may decline much further.

“Most measures of export orders point to a much greater decline in foreign demand than has so far been reflected in the customs data,” said Julian Evans-Pritchard, head of China Economics at Capital Economics. “And the near-term outlook for consumer spending in developed economies remains challenging, with many still at risk of recessions later this year, albeit mild ones.”

As a result of the report, Asian equities declined and the Chinese yuan fell to a three-week low.

Although the state planner promised stimulus last week, initiatives to increase spending in the real estate, automotive, and services industries have so far failed to impress investors.

As other major economies hike interest rates to rein in skyrocketing inflation, Beijing is seeking for measures to increase domestic demand without loosening monetary policy too much for fear of causing significant capital outflows.

The remainder of Asia’s economy is being impacted by this. The greatest loss in three months occurred in July when South Korean exports to China dropped 25.1% from a year earlier. China’s trade surplus increased by $80.6 billion, exceeding the poll’s prediction of $70.6 billion.

(Adapted from Investing.com)

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