China’s official customs data shows that its exports rose 18% in July from a year ago, 0.1% up from June. However, a recent report from Bloomberg shows that China’s factories are suffering due to weakening export orders.
Bloomberg noted that the current performance of China’s major manufacturing hubs reflects the attitude of global consumers. Households worldwide have already tightened their belts to cope with rising inflation and prepare for a potential global recession.
Manufacturers of apparel, tents and Christmas decorations told the outlet that orders from overseas customers are dropping. Some even hope to achieve just the same as last year’s demands.
Clark Feng, manager of tents and furniture vendor Vita Leisure Co., said that his company’s export orders have been falling since March and current demands from European customers amount to only 30%-50% of last year’s. Some of his suppliers have already laid off staff or sent them on vacation, something he has never witnessed in the industry.
In addition, a marketing manager at a textile factory in Ningbo, Wendy Ma, commented that consumers don’t have money to spend amid soaring inflation. According to Ma, major markets U.S and Europe’s demands for buttons, sewing thread and zippers in July and August shed 30% from a year ago.
Head of China economics at Macquarie Group Ltd., Larry Hu, told Bloomberg, “the general direction is export growth will slow down in the coming months, and it’s possible to reach a negative territory by the end of the year.”
Feng explained to the outlet the reason for falling demand was due to overseas customers trying to clear their current stock instead of ordering new products.
He added, “Our products were very popular last year, and now we swing from one extreme to another extreme and the demand is even lower than pre-pandemic. There’s a sense of panicking.”
Bloomberg reported that inventories at firms in the S&P consumer-discretionary and consumer-staples indexes increased by $93.5 billion, up 25% from a year earlier. This was the result of companies’ bulk purchases to avoid shipping delays and to meet front-loaded Christmas orders.
Moreover, the report noted that China’ stringent zero-COVID policy was another headwind that has weighed on consumer demands and undermined the manufacturing industry. Yiwu, the world’s biggest hub for Christmas products is a telling case.
Cai Qinliang, secretary-general of the Yiwu Christmas Products Industry Association, which has 200 members that own 500 to 600 factories, said Christmas businesses dropped by more than 50% after the COVID-19 pandemic started in early 2020.
He added that sales increased last year but are still 20% to 30% lower than before the pandemic, and may maintain at the same level for this year.
Recently, top Chinese leaders have signaled that they would likely miss the government’s annual growth target of around 5.5% this year.
In late July, the IMF downgraded its China’s 2022 growth forecast to 3.3% from 4.4% in April, citing Covid strict lockdowns and the ailing property sector in the country.