Foreign Investors Consider Ditching China After Exports Slump
China’s export growth slumped in April to its lowest level in almost two years as the country’s “zero-COVID” policy continues to impact manufacturers and, according to trade experts, pushes many foreign businesses to reconsider operations in China.
Exports in terms of dollars grew 3.9% in April from the year-ago period, marking the slowest pace since June 2020, according to China’s customs administration.
They also dropped sharply from the 14.7% growth reported in March, according to official figures.
Import growth was essentially flat in April, improving slightly from a 0.1% decline in March and a bit better than the 3.0% contraction by a Reuters poll.
The weak figures reflect the state of China’s trade sector, which accounts for about one-third of gross domestic product. The sector has been losing momentum as COVID-19 restrictions across the country disturb supply chains in major centers such as Shanghai, which has been under a lockdown since late March.
It’s not clear when authorities will fully lift the restrictions. The city tightened them over the weekend as President Xi Jinping pledged to “unswervingly” double down on the zero-COVID policy.
Auto factories and other manufacturers that tried to keep operating by having staff live at their facilities were forced to reduce production because of supply chain disturbances and logistics issues.
Tesla Inc. has halted most production at its Shanghai plant because of problems securing parts for its electric vehicles, according to an internal memo seen by Reuters.
According to the memo, the plant planned to manufacture fewer than 200 vehicles at its Shanghai factory on Tuesday, far below the roughly 1,200 units a day it was producing shortly after reopening on April 19 after a 22-day closure.
“Shanghai’s lockdown had impacted components of China’s economy that are the most vulnerable — service workers, delivery drivers and other people still working,” Rui Zhong, program associate at the Wilson Center’s Kissinger Institute on China and the United States, said in an email. “This includes Tesla workers who are producing luxury vehicles in conditions that have been described as them sleeping in factories.”
Tesla’s sales in China slumped by 98% in April, according to data released Tuesday by the China Passenger Car Association (CPCA). After reopening, the factory sold 1,512 vehicles in April, down from 65,814 cars sold in March, according to CPCA.
Other automakers also reported a steep slowdown in sales and production for April. Toyota, the world’s largest carmaker, reported that it was halting some operations in eight plants in Japan from May 16 to 21 because of a parts shortage resulting from the lockdown in Shanghai, according to the Automotive News website. More foreign businesses in China are cutting revenue expectations and plans for future investment because of China’s recent COVID-19 outbreak and related restrictions.
A survey released Monday by the American Chamber of Commerce in China shows that 58% of survey respondents said they have decreased their 2022 revenue projections, up from 54% in a similar survey in April. Meanwhile, 52% of respondents have already either delayed or decreased investments in China.
The latest study, conducted from April 29 to May 5, covered 121 companies with operations in China.
Gordon Chang, author of the 2021 book “The Coming Collapse of China,” told VOA Mandarin in an email that despite concerns raised by foreign businesses, China would stick to its strict coronavirus containment policy at least through the end of May.
“Many, however, think the lockdown of Shanghai will continue through at least the end of this month and the ‘zero-COVID’ policy will continue through the (Chinese Communist) Party’s 20th National Congress, which will be held in the fall if tradition holds,” Chang said. The congress is scheduled to convene in the second half of 2022.
Some information for this report came from Reuters and Agence France-Presse.