China’s Trade Surplus Shrinks More Than Expected in August

By Ambar Warrick 

Investing.com-- China’s trade surplus shrank more than expected in August, data showed on Wednesday, as sluggish manufacturing and COVID-related disruptions weighed on both exports and imports.

China logged a trade balance of $79.39 billion in August, a report from the National Bureau of Statistics showed. The figure was well below expectations for a surplus of $92.7 billion, and also fell sharply from July’s reading of $101.26 billion.

The dismal readings come as new COVID-19 lockdowns disrupted activity in China’s major trading hubs, such as the eastern city of Yiwu. Economic hubs such as Shenzhen and more recently, Chengdu, were also subject to new curbs.

China’s manufacturing sector shrank in August as a power crunch, stemming from a drought in the Sichuan province, caused factory closures. A recent earthquake in the region also further disrupted activity. 

China’s exports grew by 7.1% in August, with growth more than halving from July and coming well below expectations of 12.8%. Slowing economic activity across the globe is weighing on overseas demand for Chinese goods. 

Growth in China’s key service sector also slowed in recent months due to headwinds from COVID-19 disruptions.

This saw domestic demand tumble sharply in the country, which in turn pressured imports. Imports barely expanded during August, growing 0.3% as compared to expectations of 1.1%.

Beijing's reluctance to relax its strict zero-COVID policy is at the heart of China's economic weakness this year. A series of lockdowns ground Chinese economic activity to a halt, severely denting local manufacturing, as well as consumer spending. 

Wednesday's reading casts further doubts over the country's economic prospects in the third quarter, given that the Chinese economy barely expanded in the second quarter. 

The Chinese yuan, which was already trading lower on Wednesday, deepened its losses after the trade data. Currencies of countries that depend on China as a market, such as Australia and Singapore, also fell further.