China’s exports are dipping sharply again–is the world’s second largest economy in trouble?

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Growth in the Chinese export sector that bounced back in March-April this year — is now showing signs of slowing down. While heavy floods along with a resurgence of Covid 19 in certain provinces of the country led to the slowdown, analysts India Narrative, spoke to, said that the geopolitical uncertainties have also led to a rise in scepticism against China.</p>
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As the world gradually emerges from the Covid 19 clutches, many countries in Europe have started to diversify their export basket rather than depending almost solely on China. Not just that. The cost of labour in China is no longer “very competitive” and other economies such as Taiwan and Vietnam are coming up as credible alternatives.</p>
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A slowdown in exports has impacted the country’s manufacturing sector—which has been the ‘factory of the world’.</p>
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The Caixin/Markit manufacturing Purchasing Managers Index (PMI) for China in August stood at 49.2 down from 50.3 in July. A reading below 50, on a 100 point scale, is taken as contraction.</p>
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According to <a href="https://tradingeconomics.com/china/exports">Tradings Economics</a> – an economic data portal, this was the first contraction in factory activity since April 2020, dragged down by containment measures to curb rising cases of the Delta strain, supply bottlenecks, and high raw materials.</p>
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China’s exports at $282.66 billion in July, increased 19.3 per cent compared to the corresponding month in the previous year, when most of the countries were in the middle of stringent restrictions induced by the Covid 19 pandemic. But what has been worrying policymakers is the fact that in June the jump was 32.2.</p>
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The export sector has been one of the key factors boosting the Chinese economy.</p>
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The <a href="https://www.scmp.com/economy/china-economy/article/3144205/china-export-growth-slows-sharply-july-favourable-base-effect">South China Morning Post</a> said that the slowdown in export growth will be seen as a further sign of an overall easing in expansion as the year progresses.</p>
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Several reports have suggested that growth in the export sector will remain muted in the second half of the year as well.</p>
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A slowdown in exports would mean more pain for the Chinese small and medium enterprises.</p>
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The unemployment rate in the country has shown a marginal increase too. Statista—a data collation portal said that In July 2021, the surveyed unemployment rate in urban areas of China ranged at 5.1 per cent, slightly up from 5.0 per cent in the previous month.</p>
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The slowdown has come amid China’s uncertain economic policy measures as President Xi Jinping kicked off the “common prosperity” plan, marking a shift from the previous policy alignment facilitating economic prosperity.</p>
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“While the economy of the country continues to be robust, there are underlying tensions and this is only growing. Global investors will have to wait and watch to see what policy actions are taken to ensure that the economy and investments remain strong,” an analyst told India Narrative. </p>