The value of China's exports declines sharply due to falling prices

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China's exports fell sharply in dollar terms in March, as falling prices for Chinese goods hurt producers in the world's second-largest economy.

The value of Chinese exports fell by 7.5 percent in March from a year earlier, compared to a Reuters poll of analysts who expected a contraction of 2.3 percent. The value of imports decreased by 1.9 percent, compared to analysts' expectations of an increase of 1.4 percent.

The decline in the value of exports comes despite rising volumes and highlights the challenges facing Beijing as it turns to manufacturing and trade to try to pull the economy out of a deep recession caused by a slowdown in the real estate sector.

Excess capacity in some sectors – especially those favored by industrial policy, such as electric cars, solar panels and other areas – is reducing the cost of China's exports and helping it gain global market share, economists said.

“The most intense price competition is already happening in the high-tech area of ​​producing vehicles, solar panels and wind turbines…so it is hitting economies like Germany, Korea, Taiwan and Japan.”“,” “What matters is the volumes, and when we compare volumes outside China, they are at record levels,” said Frederic Neumann, chief Asia economist at HSBC.

Beijing faces growing accusations from the United States and Europe that its industries are suffering from an oversupply, raising fears that exporters will flood international markets with cheap, subsidized goods.

China's trading partners are calling on Beijing to stimulate domestic demand to fill the gap left by the real estate sector, which once accounted for nearly a third of gross domestic product.

But Chinese officials in recent weeks have launched a campaign to reject Western claims of excess capacity, saying their export prices are falling and they are gaining market share due to innovation and competitiveness. China's producer price index has fallen for 18 straight months, while consumer prices are close to deflation in a sign of weak demand.

“The decline in product prices is often related to fluctuations in raw material costs, technological upgrades and producers voluntarily reducing prices, among other factors,” Wang Lingjun, deputy minister of the General Administration of Customs, said during a press conference in March. Preparation. “Chinese goods are widely welcomed globally for their innovation and quality.”

The Chinese government has set what analysts described as an ambitious target of 5 percent GDP growth for 2024. Beijing announced a program to stimulate domestic demand through a program for the industry to “modernize” its equipment and to encourage consumers to buy new devices.

The decline in export revenues in March follows a sharp increase in January and February that was driven by a rebound in the electronics cycle and increased shipments to countries such as Russia.

German Chancellor Olaf Scholz is scheduled to visit China next week, and is expected to call on his counterparts to break down barriers to foreign companies in areas such as government procurement.

“China is gaining market share against other Asian exporters and perhaps against exports elsewhere in the world,” HSBC's Neumann said.

He added that the country's low prices are good for consumers around the world and will help governments combat inflationary pressures, but they mean greater competitive pressures on exporters in other countries.

“This deflationary effect is being exported to the rest of the region at least on the export side,” Newman said.

Eswar Prasad, an economist and professor of trade policy at Cornell University, said the decline in the dollar's value may have been due to exchange rate factors and some “persistent weaknesses in some of China's key external markets, especially in Europe.”