China Exports Plunge as Middle East Conflict Escalates

This marks a steep drop from the 21.8% surge recorded in the first two months of the year, which was buoyed by strong demand for electronics linked to the artificial intelligence boom. Imports surged 27.8%, the fastest pace since late 2021, reflecting higher commodity prices and firms securing supplies amid volatile global markets.

Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, attributed the decline to rising uncertainty from the conflict. The conflict triggered a global energy shock, particularly after disruptions around the Strait of Hormuz, making China, a major energy importer, vulnerable.

Natural gas imports dropped 10.7% and crude oil imports fell 2.8% in March. Rising fuel costs push up factory input prices, which Chinese producers struggle to pass on.

Analysts expect sustained pressure on global supply chains. Despite the slowdown, sectors like semiconductors, electric vehicles, and green technologies show resilience.

Chen Bo, Senior Research Fellow at the National University of Singapore, stated Chinese goods become "even more competitive" as energy costs rise faster elsewhere. However, China's broader growth model remains under strain, with domestic consumption not fully recovered, leaving the $19 trillion economy dependent on external demand.

Growth is expected to slow to 4.6% this year.