Although the decreases were milder than anticipated, China’s exports and imports continued to shrink in August due to the dual pressures of weak domestic consumer spending and declining global demand.

The trade figures come after a string of other signs that suggest that China’s economy may be stabilising, but they still fall far short of the increase that experts had predicted earlier this year when the government lifted its harsh Covid restraints.

Customs statistics revealed on Thursday that exports fell 8.8% in August compared to the same month last year, exceeding the 9.2% estimate in a Reuters poll and following a 14.5% decline in July. Imports decreased 7.3%, which was less than the predicted 9.0% decline and the 12.4% decline from the previous month.

As policymakers struggle with a worsening real estate slump, poor consumer spending, and falling credit growth, China’s economy is in danger of falling short of Beijing’s annual growth target of approximately 5%, prompting analysts to reassess their predictions for the year.

“The trade data is marginally better, but I don’t think we should be reading too much into that: trade is still contracting,” said Frederic Neumann, chief Asia economist at HSBC.

“There is a bit of a sign here of stabilisation, but I think there’s still a long way to go,” he added.

Beijing has announced a number of initiatives in recent months to support growth, with the central bank and the top financial regulator last week relaxing certain borrowing restrictions to assist homeowners.

Analysts caution that the actions might not have much of an impact because the labour market recovery is sluggish and household income expectations are uncertain.

“The figures suggest the headwinds remain, despite some marginal improvement,” said Zhou Hao, chief economist at Guotai Junan International. “Looking ahead, whether China’s trade growth has already hit the bottom will hinge on several factors, the most important of which is obviously domestic demand.”

Since many exporting countries rely heavily on China’s market for growth, governments all over the world are concerned about the country’s slowing economy.

South Korean exports to China, a leading indication of that country’s imports, decreased by just 5% last month, dropping from a decline of 27.5% the previous month, another sign that things are beginning to improve in China.

Trade declines with the US, Southeast Asia, and Australia all shrank.

However, exports from China to its neighbour fell 20% in August compared to the same month last year, while imports deteriorated by 17%. This led to a severe decline in trade with Japan.

Tokyo’s policymakers worry that China’s deteriorating economic conditions may harm Japan’s shaky recovery, particularly if Beijing fails to provide sufficient stimulus to boost demand.

August saw a 31% increase in crude oil exports to China compared to the same month last year and a 21% increase over July. August also saw a 31% increase in soybean imports compared to the same month last year, spurred on by low prices in Brazil.

While some analysts noted signs of stability in the data, investors were less than pleased to see the yuan languishing near a 10-month low and the Australian dollar, a barometer for Chinese growth, weakening in the wake of the report.

In contrast to the forecasted $73.80 billion and the $80.6 billion number for July, China reported a trade surplus of $68.36 billion in August.

“Due to the low base at the end of last year, it’s very likely for exports to return to growth at the end of this year,” said Nie Wen, an economist at Hwabao Trust.

(Adapted from USNews.com)

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