China’s exports and imports unexpectedly contracted in October, the first simultaneous drop since May 2020, as rising inflation and rising interest rates hit global demand, while new COVID-19 restrictions production and consumption were interrupted in the country.
The grim trade figures for October highlight the challenge for policymakers in China, as exports had been one of the few bright spots for the struggling economy.
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Outbound shipments in October contracted 0.3 percent from a year earlier, a sharp turn from a 5.7 percent rise in September, official data showed on Monday, and well below analysts’ expectations. of an increase of 4.3 percent.
It was the worst performance since May 2020.
The data suggests that demand remains fragile overall, increasing pressure on the country’s manufacturing sector and threatening any significant economic revival in the face of persistent COVID-19 restrictions, prolonged property weakness and recession risks. global.
Chinese exporters were even unable to capitalize on a further weakening of the yuan currency and the key year-end buying season, underscoring growing strains for consumers and businesses around the world.
“Weak export growth likely reflects both weak external demand and supply disruptions due to COVID-19 outbreaks,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, citing COVID-19 disruptions in the industry. factory of Foxconn, a major supplier to Apple. , in Zhengzhou is an example.
Apple Inc said it expects lower-than-anticipated shipments of high-end iPhone 14 models following a key production cut at a virus-hit plant in China.
“Looking ahead, we believe that exports will fall further in the coming quarters. The change in global consumption patterns that drove demand for consumer goods during the pandemic will likely continue to fade,” said Zichun Huang, an economist at Capital Economics.
“We believe that aggressive financial tightening and the drag on real incomes from high inflation will push the global economy into recession next year.”
Greater weakness of imports
Nearly three years into the pandemic, China has adhered to a strict COVID-19 containment policy that has exacted a heavy economic toll and caused widespread frustration and fatigue.
Weak factory and trade figures for October suggested the world’s second-largest economy is struggling to get out of a rut in the final quarter of 2022, after it reported a faster-than-expected rebound in the third quarter.
Chinese lawmakers pledged last week to prioritize economic growth and press ahead with reforms, easing fears that ideology could take precedence as President Xi Jinping began a new leadership term and disruptive lockdowns continued without a strategy of clear exit in sight.
Tepid domestic demand, weighed down by new COVID-19 restrictions and closures in October, as well as a cooling property market, also hurt imports.
Incoming shipments fell 0.7 percent from a 0.3 percent rise in September, below an expected 0.1 percent rise, the weakest result since August 2020.
China’s soybean imports fell and coal imports shrunk as strict pandemic measures and property declines disrupted domestic production.
Headline trade figures resulted in a slightly wider trade surplus of $85.15 billion, compared with $84.74 billion in September, down from a forecast of $95.95 billion.