Amid a slowdown in economic activity in China, India’s exports to its northern neighbor fell 35% to $6.8 billion between April and August, at a time when overall exports from the countries increased by 17.1%. China became India’s fourth largest export destination during the period, rising from the second position during the same period a year ago.
Multiple shocks have hit the Chinese economy, including the slowdown in consumption due to the zero Covid policy, the prolonged impact of the slowdown in the real estate sector and the drop in export demand, all of which have slowed economic activity. .
While exports of petroleum products such as naphtha to China rose 81% to $1.2 billion between April and July due to high crude oil prices, shipments of organic chemicals (-38, 3%), iron ore (-78.5%) and aluminum products (-84.2) saw sharp declines, according to disaggregated data available on the Department of Commerce website. However, China increased its imports of non-Basmati rice (141.1%) and seafood products (18.7%) during the period. A reduction in steel production in China has also led to a sharp decline in iron ore exports from India.
On the other hand, imports from China increased by 28% from April to August, at a time when India’s overall imports increased by 45.6%, leading to a trade deficit of 37.1 billion. dollars in the first five months of FY23.
India’s growing trade deficit with China – the highest of any country – is cause for concern. “The growing trade deficit with China could be attributed to two factors: a narrow basket of mainly primary commodities that we export to China and market access barriers for most of our agricultural and sectors in which we are competitive, such as pharmaceuticals, IT/ITeS, etc. Our main exports are iron ore, cotton, copper, aluminum and diamonds/natural gemstones. time, these commodity-based commodities have been eclipsed by China’s exports of machinery, energy-related equipment, telecommunications equipment, organic chemicals and fertilizers.We continue to engage the Chinese side to resolve market access issues,” the Indian Embassy in China explains on its website.
China’s economy braces for more pain as the lockdown in Chengdu, the country’s sixth-largest city in the west, has damaged business and consumer activity in the region and hurt sentiment more broadly. The hit to global production and shipping from China’s strict Covid lockdown policies has also delayed the resumption of global supply chain activity.
Moody’s last week lowered its growth forecasts for China for 2022 and 2023 to 3.5% and 4.8%, respectively, from 8.1% in 2021.
Trade data for July showed an increase in China’s trade surplus to a record $101.26 billion from $97.4 billion in June. “China’s recovery beyond 2023 will depend on the ripple effects on other sectors resulting from the turmoil in the real estate sector and the measures taken by the authorities to stabilize it, as well as the impact on household balance sheets. and their consumer-saving decisions. A strong recovery in domestic consumer demand, alongside the increased infrastructure spending the government is already undertaking, will be key to sustaining a strong recovery,” Moody’s said.
Source: Trade Standard