Falling demand for Chinese goods threatens the shaky world economy, Kostyantyn Kryvopust


The weakness partly reflects companies’ intention to reduce dependence on Chinese supplies


  • US orders for Chinese manufactured goods have fallen significantly, leading to lower freight rates and lower trade volume.
  • The decline in demand partly reflects a broader global shift away from reliance on Chinese suppliers.
  • The recent weakness threatens economic forecasts and potentially complicates policy efforts to combat global inflation.

Orders for Chinese goods have fallen in recent months, foreshadowing new challenges for the world’s second-largest economy that could ripple across the already cooling global economy next year.

Orders for Chinese manufactured goods in the U.S. fell 40%, according to data compiled by CNBC’s Supply Chain Heat Map. The fall has weakened global trade and could cause China’s factories, which usually shut down production for a week each January to celebrate the Lunar New Year, to close for several weeks early next month.

The drop in orders is the latest hurdle for China’s economy, which is grappling with how to ease tight pandemic restrictions, a weak housing market and a government crackdown on the private sector, particularly the technology industry, which has lost more than $1 trillion in market value in the past two years. .1

Falling demand for Chinese manufacturing products further darkens the prospects of the world economy, which is facing high inflation, rising interest rates and the consequences of the war in Ukraine. It’s already had an impact, with all four sentiment indicators in Bloomberg’s Trade Tracker falling below average in early December, and the Baltic Exchange Dry Index, which measures the cost of shipping goods around the world, has fallen by a third in just the past two months. .23

The economic forecast “markedly worsened”

The easing of Covid-19 restrictions is likely to boost China’s growth next year. The OECD expects its economy to grow by 4.6% next year from 3.3% in 2022, even though overall global growth will slow to 2.2% in 2023 from 3.1% this year.4

However, the decline in the number of orders for Chinese goods threatens to lower both forecasts, since such exports make up a fifth of the country’s economic output.

China’s outlook has “deteriorated markedly” this fall, Geeta Gopinath, deputy managing director of the International Monetary Fund, said this week.

Speaking at a panel discussion organized by the Board of General Directors The Wall Street Journal Gopinath said the IMF cut its forecast for China’s growth rate in 2023 to 4.6% in October from 6%, “and in January we will come down.”5

This is not just a problem of short-term demand

The decline in demand for Chinese goods partly reflects the departure of many global companies from China as the main source of spare parts and raw materials. Frustration over supply chain challenges due to the pandemic and expanded national restrictions have prompted many companies to reconsider their reliance on Chinese suppliers.

Many American firms, for example, have restarted domestic production. Companies around the world have also moved production to India, Vietnam and other Southeast Asian countries with fewer regulatory hurdles and cheaper labor.

The US government’s recent implementation of the CHIPs and Science Act, which promotes domestic semiconductor manufacturing, underscores the challenges facing Chinese suppliers. Micron Technology, one of the world’s leading chipmakers, recently announced plans to build a $20 billion manufacturing facility in upstate New York, an investment that could eventually grow to $100 billion over the next 20 years and create tens of thousands jobs in the region. .6

Meanwhile, last weekend’s newspaper The Wall Street Journal reported that Apple plans to move a significant part of iPhone production outside of China. The company has endured supply shortages throughout the pandemic, exacerbated by recent protests at the world’s largest iPhone factory in Zhengzhou.

Apple reportedly lost $1 billion a week in iPhone sales in November due to factory turmoil. Foxconn, the factory’s owner, said this week that full production would resume by early January.

Consequences of monetary policy

Still, a slowdown in demand for Chinese goods in 2023 could have broader implications for global economic policy.

Central banks in developed markets, led by the Federal Reserve, have raised interest rates significantly this year to tackle the fastest surge in global inflation in four decades.

The global recession of 1982, when growth in developed countries fell even below that of the 2008 financial crisis, occurred after central banks raised interest rates sharply to combat inflation.7

Many economists fear that this scenario may repeat itself in the coming months.

Forecasts of a US-led global economic downturn have increased over the past few months. Among other things, Ned Davis Research predicts a 98% chance of a global recession, the Bloomberg Economic Model predicts a 100% chance of a US recession, and the latest poll The Wall Street Journal among economists shows that 63% expect a recession in the US in the next 12 months.

With recession risks clearly rising, the Fed and other central banks may find it more difficult to meet their anti-inflation targets, especially if weak demand for Chinese goods and sluggish global trade persist.

Share post:


More like this

Democrats in the Senate will ease the pressure on Biden regarding PP2 through negotiations with the Kremlin

Top Democrats in the US Senate have consistently supported...

A more detailed program to protect Kyiv from aggression has been developed, Klitschko

The mayor of Kyiv believes that Russian encroachments on...

Commentary of the National Bank on the level of inflation in February 2023

In February 2023, consumer inflation continued to decelerate in...

Air force anti-aircraft fighters shot down a Russian Su-24M plane near Bakhmut

The occupiers' aircraft failed to complete the mission and...