China’s exports and imports unexpectedly contracted in October, the first simultaneous decline since May 2020, as rising inflation and higher interest rates hampered global demand while new COVID-19 restrictions at home disrupted production and consumption.
The bleak trade figures for October highlight the challenge facing policy makers in China as exports were one of the few bright spots of the faltering economy.
Official data on Monday showed shipments out of October contracted 0.3% from a year earlier, a sharp turnaround from a gain of 5.7% in September, and well below analysts’ expectations for a 4.3% increase. It was the worst performance since May 2020.
The data suggests that demand remains weak overall, putting further pressure on the country’s manufacturing sector and threatening any meaningful economic recovery in the face of ongoing COVID-19 restrictions, prolonged property weakness and risks of a global recession.
Chinese exporters weren’t even able to take advantage of further weakness in the yuan and a major year-end shopping season, highlighting the mounting pressures on consumers and businesses around the world.
“The weak export growth likely reflects both weak external demand as well as supply disruptions due to the COVID outbreak,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, referring to the COVID disruptions at the Foxconn factory, a major supplier to Apple, in Zhengzhou. One example.
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(AAPL) It said it expected lower-than-expected shipments of high-end iPhone 14 models after a major production cut at a virus-infested factory in China.
“Looking ahead, we believe exports will decline further over the coming quarters. The shift in global consumption patterns that has led to an increase in consumer demand during the pandemic will likely continue to decline,” said Zhichun Huang, an economist at Capital Economics.
“We believe that aggressive fiscal tightening and a drag on real income from rising inflation will push the global economy into recession next year.”
Nearly three years after the outbreak of the epidemic, China has adhered to a strict containment policy of the COVID-19 virus, which has caused huge economic losses and caused widespread frustration and fatigue.
Weak October factory and trade numbers indicated that the world’s second-largest economy was struggling to get out of the mud in the last quarter of 2022, after reporting a faster-than-expected recovery in the third quarter.
Chinese policymakers vowed last week to prioritize economic growth and press ahead with reforms, easing concerns that ideology may take precedence as President Xi Jinping begins a new leadership term and troublesome lockdowns continue with no clear exit strategy in sight.
Lutey domestic demand, weighed down by new COVID restrictions and lockdowns in October as well as a cold real estate market, has hurt imports as well.
Incoming shipments fell 0.7% from a 0.3% increase in September, less than the expected 0.1% increase – the weakest result since August 2020.
China’s soybean imports fell and coal imports declined, as strict epidemic measures and declining property disrupted domestic production.
The overall trade numbers resulted in a slight increase in the trade surplus of $85.15 billion, compared to $84.74 billion in September, beating expectations of $95.95 billion.
