BEIJING, Nov 7 (Reuters) – China’s exports and imports unexpectedly shrank in October, the first simultaneous decline since May 2020, as a perfect storm of Covid-19 restrictions at home and a global slowdown dampened demand and further darkened the outlook for the struggling economy.
The bleak data underscores the challenge as policymakers in China scramble to contain the pandemic and try to navigate broader pressures from rising inflation, rising global interest rates and a global recession.
Outbound exports in October contracted 0.3% from a year earlier, a sharp reversal from a 5.7% gain in September, official data showed on Monday, and below analysts’ expectations for a 4.3% increase. This is the worst performance since May 2020.
The data suggest overall demand remains weak, and analysts warn of further gloom for exporters in the coming quarters as the country’s manufacturing sector and the world’s second-largest economy grapple with persistent COVID-19 restrictions and lingering asset weakness.
Chinese exporters have also been unable to take advantage of lingering weakness in the yuan since April and the key year-end shopping season, underscoring strains that are expanding for global consumers and businesses.
The yuan on Monday eased 0.4% from a more than one-week high against the dollar in the previous session, as weak trade data and Beijing’s vow to pursue its strict zero-covid strategy hurt sentiment.
“Weak export growth reflects both poor external demand and supply disruptions caused by the Covid outbreak,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, citing Covid disruptions at a Foxconn factory, a major Apple supplier. .
Apple Inc (AAPL.O) It said it expects lower-than-expected shipments of high-end iPhone 14 models following major production cuts at the virus-hit Zhengzhou plant.
“Looking forward, we think exports will decline further in the coming quarters. We think aggressive fiscal tightening and the drag on real incomes from high inflation will push the global economy into recession next year,” said economist Jichun Huang. Capital economy.
Growth in auto exports also slowed significantly to 60% year-on-year from 106% in September, reflecting a shift in demand from goods to services in major economies, according to Reuters calculations based on customs data.
Overall exports to China’s key markets, the United States and the European Union, fell 12.6% and 9% year-on-year in October, respectively.
Domestic woes hamper growth
Nearly three years into the pandemic, China has clung to a strict COVID-19 containment policy that has taken a heavy economic toll and fueled widespread frustration and exhaustion.
Weak October factory and trade figures suggested the economy was struggling to get out of trouble in the last quarter of 2022, after it reported a faster-than-expected recovery in the third quarter.
The war in Ukraine, which fueled a surge in already high inflation worldwide, added to geopolitical tensions and further slowed business activity.
Chinese policymakers pledged last week to prioritize economic growth and reforms, easing fears that ideology may take precedence as President Xi Jinping begins a new leadership term and crippling lockdowns continue with no clear exit strategy in sight.
Weak domestic demand, partially offset by new Covid restrictions and lockdowns in October, hurt importers.
Inbound exports fell to 0.7% from a 0.3% gain in September, below a forecast 0.1% increase, marking the weakest result since August 2020.
The severe impact on demand of severe pandemic measures and asset collapse, highlighted in the vast amount of Chinese imports; After hitting a 10-month high in September, soybean purchases fell to an eight-year low last month, while copper imports fell and coal imports eased.
On top of the global slowdown, weak domestic consumption will put more pressure on China’s economy for some time to come, analysts say.
“Insufficient domestic demand remains the main obstacle to China’s short-term recovery and long-term growth path,” said Bruce Pang, chief economist at Jones Lang LaSalle.
Reporting by Ellen Zhang and Ryan Wu; Editing by Sri Navaratnam
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