News that China’s exports plunged by a fifth last month went down extremely badly on the Shanghai stock markets.
The benchmark CSI 300 has slumped by 4%, as traders fretted that China’s economy is weakening.
Even stripping out the impact of the Lunar new year, China’s economy has weakened clearly this year.
If you combine January and February’s trade data, Chinese exports are down 4.6% year-on-year while imports are down 3.1%.
Sales to the US have absolutely tanked – down 38% in February alone – as Chinese firms are hurt by US tariffs.
This chart shows the scale of China’s export tumble:
Introduction: China export plunge spooks market
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Fears over the health of China’s economy have intensified after a worrying plunge in exports.
Trade data released overnight shows that Chinese exports plunged by over 20% in dollar terms in February, much worse than the 4.8% economists had expected.
Imports also slid, dropping by 5.2% compared to forecasts of a 1.4% decline.
Such a sharp fall in exports suggests Chinese companies are feeling the full force of the recent global slowdown, and that the tariffs imposed by Donald Trump on exports to America are now biting.
It’s also possible that the Lunar New Year distorted the figures, as many firms shut down to allow staff to take holidays or travel home.
But can that really account for China’s trade surplus shrinking to just $4.12bn, down from over $39bn in January, and significantly below the $26.38bn economics forecast?
Julian Evans-Pritchard, senior China economist at Capital Economics, says seasonal distortions can’t be solely blamed – the global slowdown is also responsible.
“The upshot is that today’s downbeat data provide further evidence that global demand is cooling and remains consistent with subdued domestic demand.
“A row back in U.S. tariffs would provide a mild boost to exports but not enough to offset the broader external headwinds. Meanwhile, with policy stimulus unlikely to put a floor beneath growth until the second half of the year, imports will remain under pressure in the near-term, ” he added.
This comes just a day after the European Central Bank slashed its growth forecasts, and announced fresh loans to eurozone banks in an attempt to stimulate the economy.
Stocks slid in China after the trade data was released, and European markets are expected to open lower too.
Also coming up today
The latest US jobs report is likely to show that job creation dropped last month. Economists predict the Non-Farm Payroll rose by around 180,000, down on January’s impressive 304,000 new jobs.