China’s foreign trade fell less sharply than expected in September. This is seen as a sign of stabilization in the second largest economy. As the customs authority in Beijing announced on Friday, exports fell by 6.2 percent compared to the previous year. Imports also fell 6.2 percent year-on-year. In a direct comparison to the previous month, Chinese foreign trade increased by 3.8 percent, which indicates an improvement in the economic situation.
Nevertheless, trade with Germany is also modest over the year. While Chinese exports to the Federal Republic fell by 10.9 percent year-on-year in September, imports from Germany fell by 7.2 percent.
“The downward trend seems to have stopped for the time being. However, it would be premature to speak of a trend reversal; for that to happen, the Chinese economy would first have to pick up again,” said Jens Hildebrandt, managing board member of the German Chamber of Commerce (AHK) in Beijing. “German companies are preparing for a longer dry spell.”
How is China’s economy doing?
China’s economy is suffering from currently weak global demand. There is also concern that Beijing will not be able to get the country’s real estate crisis under control. Many real estate developers, who have become heavily indebted in the hunt for more and more profits and have often built to meet demand, no longer know how to pay back the money they borrowed. Just at the beginning of the week, Country Garden, one of the country’s largest real estate developers, announced that it had not made outstanding payments.
Companies are disappointed by the fact that Beijing is foregoing large aid packages for the economy in the current crisis. Uncertainty is spreading among consumers, which is reflected in weak consumption and stagnating prices.
In a warning sign of impending deflation, consumer prices in China did not rise in September. As the Beijing Statistics Office announced on Friday, prices for goods and services remained unchanged compared to the same month last year. Analysts had expected at least a slight price increase. In August, consumer prices in the second largest economy rose slightly by 0.1 percent, but there was a decline of 0.3 percent in July.
Producer prices in China continued to fall in September, but at 2.5 percent the decline was once again somewhat weaker than in the same period last year.
What does deflation mean?
Deflation is the opposite of inflation and refers to the decline in the general price level. A broad-based price decline occurs when consumers hold back on purchases in anticipation of ever-decreasing prices, which in turn depresses companies’ sales, profits and investments. Most economists consider deflation to be more dangerous for the development of an economy than slightly rising prices.
At first glance, consumers benefit because they have to pay less for goods and services. However, deflation usually also puts pressure on companies’ profits and therefore poses the risk of wage cuts or layoffs, for example.
