China’s better-than-expected March further trade data confirms that domestic demand has slowly recovered from the low February. It showed that China’s trade is going to prepare the new things. It set a great example to the world that suppressing the virus is the most successful way of defending development. Still, export declines will flag the risk of global deflation to come.
Imports declined modestly from a year ago by 0.9 percent in March against a 4.0 percent decrease in the first two months of the year. Meanwhile, the earlier estimate was for a fall of 9.8 percent according to a Bloomberg survey.
Coronavirus spreading in China has been largely contained since the end of February. In addition, investors started to calculate the rate of domestic growth recovery. It was after the new official manufacturing PMI climbed again above 50.
Therefore, the rebound in March’s imports indicates the worse condition might already have passed. And also, in the immediate future, there are more broad-based monetary stimulus will follow. Instead, the steady improvement in domestic demand will prompt policymakers to implement further fiscal steps in the coming months, mainly in infrastructure projects.
Potential Global Deflation
Exports fell from a year earlier by 6.6 per cent in March, the rate of declines was much lower than a 17.2 per cent decrease in this year’s first two months. Survey by Bloomberg reveals economists predicted a 13.9 per cent fall earlier. Faster declines in exports to the EU, however, may raise the risk of a potential global deflation.
Such an outcome raises concerns that lockdowns in these regions have seriously affected local factory operations, and the industrial demands from those countries are at this time extremely small.