China’s Exports Slump as Coronavirus Forces Shutdowns

China’s exports fell more than expected in the first two months of this year as the coronavirus outbreak led to extended holidays, depressed factory output, and blocked transport and movement across the country. Imports also declined, although increases in commodities purchases offset some of that.

The drop in exports was a bigger-than-expected 17.2% in dollar terms, while imports declined 4%, according to a statement from Chinese customs Saturday. While the trade surplus with the U.S. shrank, it’s probably too early to see a strong effect from the deal with the Trump administration, which was signed in January but only went into effect in mid-February.

The first two months are normally volatile for China’s economic activity due to a week-long lunar new year holiday, and this year is more unusual due to the coronavirus epidemic. The holiday, as well as quarantine and containment measures, shut down much of the economy for weeks, disrupting travel, production and transport, and the economy is still struggling to return to pre-virus levels even as the government pushes companies to restart.

“It’s hard to forecast the trend based on January-February data because these two months are quite special, but given that the coronavirus is now spreading across the world, March data won’t look so good either,” according to Larry Hu, chief China economist at Macquarie Group Ltd in Hong Kong. “China’s economic growth mainly relies on exports, real estate and infrastructure. The outlook of exports and the property market this year isn’t so optimistic, so China will likely ramp up infrastructure investment.”

Trade Deficit

Imports of commodities rose, with purchase of soybeans up 14.2%, iron ore rising 1.5%, coal climbing 33.1% and liquefied natural gas increasing 2.8%. The overall trade balance fell to a deficit of $7.1 billion for the first two months.