China, a prominent player in global trade, is currently grappling with significant economic challenges. Issues like foreign risks, unemployment, reduced demand, and declines in production and sales, are exerting substantial pressure on its business landscape.
The difficulties facing China’s manufacturing and trade sectors have persisted for a considerable period, with sentiments within manufacturing contracting in both mainland China and Taiwan throughout July. In stark contrast, India’s manufacturing sentiment during the same period was the strongest among major Asian nations.
The growth trajectory of business revenue in China, which had exhibited a 9.1 percent year-on-year increase from January to June 2022, experienced a contraction of 0.4 percent in the corresponding period of 2023. Concurrently, business profits suffered a substantial decline from 1 percent to -16.8 percent.
According to the Caixin China General Manufacturing PMI report, there was a slight reduction in production reported by companies due to an overall decline in new business. The muted foreign demand emerged as a critical factor negatively impacting total sales, with new export orders experiencing a noticeable drop in July.
The intricate interplay between PMI and business profits becomes evident as low manufacturing levels result in decreased trade activities, and this relationship is bidirectional. In July, China’s imports saw a decline of approximately 13 percent year-on-year, while exports witnessed a nearly 15 percent decrease. Numerous primary product categories encountered a drop in export figures between January and July of 2023. Notably, exports of aluminum and related products plummeted by 33 percent, automatic data processing equipment faced a 25 percent reduction, rare earth exports dropped by 21 percent, and integrated circuits suffered a notable decline of 17 percent.
China’s trade relationships with most nations experienced a contraction, apart from a few exceptions like Russia, Australia, and South Africa. The total trade volume for China dwindled by 6.1 percent year-on-year from January to July 2023. Specifically, trade with South Korea dipped by 17 percent, trade with the U.S. fell by 15 percent, and trade with India decreased by 2.1 percent during the same timeframe.
Simultaneously, the sluggish market conditions, both domestically and internationally, have had adverse effects on employment within China. The PMI report highlights that employment in China’s manufacturing sector has seen a continuous decline for five consecutive months, with the pace of job reductions moderating since the record set in May. This phenomenon of lower workforce numbers is often attributed to decreased sales and cost-cutting endeavors.
In summary, China, a major participant in global trade, is currently grappling with an array of economic hurdles. Challenges including foreign risks, reduced demand, unemployment, and diminished manufacturing and trade activities have cumulatively cast a shadow on the country’s economic landscape.