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China's trade fell below expectation,even as coronavirus spreads worldwide

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China's trade performed better than expected in March, with both exports and imports declining less than expected, even as coronavirus prompted shutdowns of business worldwide.

Exports declined from a year earlier in March by 6.6 per cent in dollar terms, while imports declined by 0.9 per cent, the customs administration said Tuesday.

Economists had predicted a 13.9 per cent decline in exports, while imports would shrink by 9.8 per cent. The monthly trade balance has narrowed to $19.9 billion.

The data indicate that global supply chains may adapt better than thought, and that the gradual restart of China's economy is continuing. At the same time, China's trade data may not yet reveal the full effect of a collapse in demand in developed economies like the US and Europe.

Exports have done better than people thought, as most exporters have only seen orders cancelled since the middle of the month, said Zhou Xue, an economist at Hong Kong's Mizuho Securities Asia Ltd. "The expected export plunge was not fully reflected in the data, and could be much worse in the second quarter."

At a press conference in Beijing, the Association of South East Asian Nations (ASEAN) became China's largest trading partner bloc, surpassing the European Union, partly due to the effect of Brexit but also increasing regional semiconductor trade, spokesman for customs administration Li Kuiwen said.

Low Demand

Now, while the domestic virus situation is getting better, more and more of China's overseas markets are locking up. That will not only hit demand for Chinese goods, but could also harm supplies of raw materials and intermediate components.

After early March, US and European importers stopped export orders as the number of lockdowns in towns increased. According to Iris Pang, an economist at ING NV in Hong Kong, this will affect exports from Aprils. Unless the world relaxes social distancing measures after relaxing lockdowns altogether, trade flows will be disrupted, exporters will face dismal worldwide demand.

Last week the World Trade Organization said it could see the worst collapse in international trade since the Great Depression this year. Their optimistic scenario has seen a 13 per cent drop in the volume of international trade in goods in 2020, worse than the 12 per cent drop in 2009 during the financial crisis.

Their pessimistic scenario is seeing the volume of global trade in goods fall this year by as much as 32 per cent.

Global policymakers have been rushing to introduce stimulus to help their economies through shutdowns and social distancing, but there is little hard evidence of a peak in infections. In China, the State Council has ordered more trade stabilisation measures, including building more cross-border e-commerce zones and moving online the main trade fair.