China Exports Fall for a Fourth Month as Once-Reliable Growth Engine Sputters

HONG KONG—China’s exports to the rest of the world dropped for a fourth straight month in August, bringing little relief to the country from a deepening economic malaise and weighing on the global trade outlook.

China has struggled to sustain a wave of overseas demand for Chinese-made goods that carried it through much of the three years of the pandemic, particularly as Western consumers tilted their spending back toward services and away from smartphones, furniture and other goods. Higher borrowing rates in the U.S. and other developed countries also hit consumer appetite.

Meanwhile, Chinese imports continued to shrink in August, a reflection of lacklustre consumer demand even after the country loosened its longstanding Covid-related restrictions. A downturn in China’s property market has also sapped demand for raw materials used in construction.

Taken together, the sluggish trade data released Thursday by Beijing provides new evidence that the world’s second-largest economy is struggling to revive domestic demand.

That would ripple through the global economy as China’s slowdown weighs on oil prices and hurts commodity-exporting countries such as Australia, Brazil and Canada. Chinese manufacturers have been under pressure to cut prices to retain market share, potentially sending disinflationary currents around the world.

While Chinese policy makers have trimmed key interest rates and made new attempts to revive home-buying sentiment, economists have widely dismissed these efforts as too piecemeal to revive growth given the speed with which sentiment has soured.

“There’s still a steep hill to climb to get the all-clear on stabilisation for China,” said Frederic Neumann, chief Asia economist at HSBC.

China’s outbound shipments declined 8.8% in August from a year earlier, China’s General Administration of Customs said Thursday. The reading narrowed from the 14.5% year-over-year drop in exports in July, which marked the worst such result since February 2020.

Imports to China, including intermediate components, commodities and consumer products, fell 7.3% in August from a year earlier, slower than July’s 12.4% drop.

Even with the better-than-feared trade data, economists generally agree that exports’ ability to provide support for China’s sputtering recovery remains a distant prospect, particularly given that global trade is expected to contract this year.

“We expect exports to decline over the coming months before bottoming out toward the end of the year,” research firm Capital Economics told clients in a note Thursday.

Apart from the general slowdown in trade, China is facing a raft of other economic headwinds. After a brief spurt of spending in traveling and dining out upon reopening early this year, consumers tightened their purse strings, dragging consumer prices into deflationary territory in July. China is set to report August inflation data on Saturday.

Factory activity, meantime, reported a fifth straight month of contraction in August, while a years long downturn in the housing market has only deepened in recent months. Private investment remains depressed, while the youth jobless rate climbed to a series of record highs in the summer before Beijing decided to discontinue releasing the data to the public.

More broadly, the run of downbeat data during the summer months has sparked growing concerns over China’s long-term growth trajectory and prompted several investment banks to trim their growth forecasts for gross domestic product to below 5% for the year, compared with the official government target of around 5%, which was set in March.

Meeting with Southeast Asian leaders this week, Chinese Premier Li Qiang struck back against widespread pessimism about the country’s near-term economic outlook, saying the country is on track to hit its growth target for the year.

While Chinese policy makers have rolled out a batch of stimulus measures in recent weeks, including trimming interest rates for businesses and home buyers and extending tax relief to households, many economists have questioned whether the policies will be enough to turn around weak consumer sentiment.

China’s reduced appetite for imports—which have fallen for 11 of the past 12 months—reflects in large part the knock-on effects of the country’s continuing property crisis. Both property investment and new construction starts have plunged in recent months amid a loss of confidence in home prices; that in turn has curbed China’s appetite for commodities such as iron ore.

The export data, meanwhile, offers more evidence of China’s shifting trade patterns.

As ties have soured between Beijing and Washington, many U.S. companies have begun to redirect supply chains away from China and toward other Asian countries such as India, leading to a sharp decline in America’s reliance on goods from China.

Rising operational uncertainty, made most clear during China’s pandemic-era lockdowns, which disrupted domestic and global production and logistics, heightened the urgency for many multinationals.

In the first half of the year, China accounted for 13.3% of U.S. goods imports, down from a high of 21.6% in 2017 and representing the lowest level since 2003.

Meanwhile, trade with the 10-member Association of Southeast Asian Nations has grown over the past year to become China’s largest export market, ahead of the U.S. and European Union, according to a recent report by HSBC.

China’s warmer trade relations with Asian countries will help buffer the impact of softening Chinese exports to advanced economies. But economists say Beijing won’t be immune if the U.S. and other advanced economies tip into recession.

Global goods trade is expected to drop by 1.5% this year in part due to tightening global monetary and credit conditions before staging a modest recovery of 2.3% growth in 2024, according to estimates by Adam Slater, lead economist at Oxford Economics.

China’s weakening trade activities, meanwhile, is likely to ripple across Asia, slowing industrial expansion and hitting commodity prices, he added.

—Xiao Xiao in Beijing contributed to this article.

For decades, Australia has leaned into its reputation as the lucky country. But luck, as it turns out, is not an economic strategy.

What once looked like resilience now appears increasingly fragile. Beneath the surface of rising property values and steady headline growth, the Australian economy is showing signs of strain that can no longer be ignored.

Recent data paints a sobering picture. Australia has recorded one of the largest declines in real household disposable income per capita among advanced economies.

Wages have failed to keep pace with inflation, meaning many Australians are working harder for less. On a per capita basis, income growth has stalled and, at times, reversed.

And yet, on paper, things still look relatively solid. GDP is growing. Unemployment remains low. But that growth is increasingly being driven by population expansion rather than productivity.

More people are contributing to output, but not necessarily improving living standards.

That distinction matters.

For years, Australia’s economic success rested on a powerful combination: a once-in-a-generation mining boom, a credit-fuelled housing market, strong migration and a property sector that rarely faltered. Between 1991 and 2020, the country avoided recession entirely, building enormous wealth in the process.

But much of that wealth is tied to property. Around two-thirds of household wealth sits in real estate, inflated by leverage and sustained by demand. It has worked, until now.

The problem is the supply side of the economy has not kept up.

Housing supply is falling behind population growth. Rental vacancies are near record lows.

Construction firms are collapsing at an elevated rate. At the same time, massive infrastructure pipelines are competing with residential projects for labour and materials, pushing costs higher and delaying delivery.

The result is a system under pressure from all angles.

Despite near full employment, productivity growth has stagnated for years. In simple terms, Australians are putting in more hours without generating more output per hour. The economy is running faster, butgoing nowhere.

Meanwhile, government spending continues to expand. Public debt is approaching $1 trillion, with spending now accounting for a record share of GDP.

The gap between spending and revenue has been filled by borrowing for decades, adding further pressure to an already stretched system.

This is where the uncomfortable question emerges.

Has Australia become too reliant on a model driven by rising property values, expanding credit and population growth?

As asset prices rise, households feel wealthier and borrow more. Banks lend more. Governments collect more revenue. Migration fuels demand. The cycle reinforces itself.

But when productivity stalls and debt outpaces real income, the system begins to depend on constant expansion just to stay stable.

It is not a collapse scenario. But it is not particularly stable either.

Nowhere is this more evident than in housing.

The National Housing Accord targets 1.2 million new homes over five years, yet current completion rates are well below that pace. With approvals falling and construction costs rising, the gap between supply and demand is widening, not narrowing.

Housing is also one of the largest contributors to inflation, with costs rising sharply across rents, construction and utilities. Yet the private sector, from small investors to major developers, is struggling to make projects stack up in the current environment.

This brings the policy debate into sharper focus.

Tax settings such as negative gearing and capital gains concessions have undoubtedly boosted demand over the past two decades. But they have also supported supply. Removing them may ease prices briefly, but risks deepening the supply shortage over time.

That is the paradox.

Policies designed to make housing more affordable can, in practice, make the shortage worse if they discourage development. The optics may appeal, but the economics are far less forgiving.

It is also worth remembering that most property investors are not institutional players. The majority own just one investment property. They are, in many cases, ordinary Australians using real estate as their primary wealth-building tool.

Undermining that system without replacing it with a viable alternative risks unintended consequences, from reduced supply to higher rents and increased inflation.

So where does that leave Australia?

At a crossroads.

The country can continue to rely on population growth and rising asset prices to drive economic activity. Or it can shift towards a model built on productivity, innovation and sustainable growth.

The latter is harder. It requires structural reform, long-term thinking and political discipline.

But it is also the only path that leads to genuine, lasting prosperity.

The question is no longer whether Australia has been lucky.

It is whether it can evolve before that luck runs out.

Paul Miron is the Co-Founder & Fund Manager of Msquared Capital.

China Exports Fall for a Fourth Month as Once-Reliable Growth Engine Sputters

Property sector’s downturn has pushed imports to their 11th month of declines in the past year

As housing drives wealth and policy debate, the real risk is an economy hooked on growth without productivity to sustain it.