Chinese Vice Commerce Minister Wang Shouwen said in a press conference Tuesday that China is seeing a gradually declining demand for goods as the global economy slows. However he still says China projects global trade to increase in the second half of 2022 as the country ramps up production after being locked down due to Covid-19 fears earlier in the year.

Wang said, “The slowdown in external demand is the biggest uncertainty faced by China’s trade. Our companies are reporting falling orders, as the demand from major markets is declining.”

The drop in demand is being attributed primarily to soaring inflation, which is weighing on consumer spending, as well as other measures affected by the inflation and economic slowdown, such as increased borrowing costs, declining perceptions of wealth among consumers, and slowing production in sectors like homebuilding.

In August, in US dollar terms, foreign sales of Chinese goods increased by 7.1%. That was the weakest growth seen since April, when Shanghai was locked down, and all sales were disrupted. Shipping costs, on reduced demand, have also hit their lowest level in over two years, as the global economy continues to sputter.

Wand noted China will definitely attain growth in foreign trade in the second half of 2022, however he cautioned that the economic slowdowns in the US and Europe are definite headwinds the Chinese economy will have to face.

Wang also pointed out that China faced other headwinds as well. As the historically high inflation has sapped consumer demand, many overseas sellers were left with large inventories they are trying to offload, as consumer preferences shifted once lockdowns ended, and this is hurting new orders. He also pointed out that the demand for electronic devices to facilitate working from home has now abated, and that too is sapping demand.

Wang noted however, that Beijing has been taking affirmative actions to try and help secure trade, including a recent large stimulus package, and additional support for ecommerce companies to builds warehouses overseas, near their points of sale. He further pointed to the rapid growth in sectors such as electric vehicles and solar batteries, which shows there is still potential for growth in Chinese production.