South Korea’s exports to China drop amid fallout from lockdowns

South Korea’s exports to China dropped in April, highlighting the impact that Covid-related lockdowns in Chinese cities are having on supply chains around the region.

Shipments to China fell 3.4% from a year earlier, compared with a 16.6% gain in March, according to a release on Sunday from the South Korean trade ministry. Overall exports advanced 12.6% last month, while semiconductor sales increased 15.8%.

South Korea serves as a barometer of worldwide demand with its manufacturing capability ranging from chips to displays and refined oil. The diversity of destinations for its overseas shipments also means its trade performance is something of a heat map for global economic activity.

Demand has been softening in Europe and China since Russia’s invasion of Ukraine and as more Chinese cities go into lockdown under the country’s Covid-Zero policy. These twin risks to the global economy have further inflamed inflationary pressures and triggered renewed disruptions in supply chains.

Still, a strong recovery in the U.S. has helped maintain momentum for South Korean exports. Demand for technology products such as displays and semiconductors also remains resilient, allowing major exporters like Samsung Electronics Co. to report a surge in earnings.

South Korea’s heavy reliance on trade means it needs exports to hold up in order to prevent the economy from slowing further, and provide scope for the Bank of Korea to stick to its path of policy normalization. The central bank meets late this month and is battling to rein in stronger-than-expected inflation. It has been among the early movers in raising interest rates.