China’s exports and imports unexpectedly contracted in October, the first simultaneous decline since May 2020, as rising inflation and rising interest rates hit global demand while new domestic COVID-19 restrictions disrupted production and consumption.
Gloomy October trade data underscores the challenge for policymakers in China as exports have been one of the few bright spots for the struggling economy.
Outbound shipments in October shrank 0.3% from a year earlier, a sharp rebound from a 5.7% rise in September, official data showed on Monday, and well below analysts’ expectations for a 4.3 increase %. It was the worst performance since May 2020.
The data shows demand remains fragile overall, putting more pressure on the country’s manufacturing sector and threatening any meaningful economic revival in the face of persistent COVID-19 restrictions, lingering property weakness and global recession risks.
Chinese exporters have not even been able to take advantage of the further weakening of the yuan and the key year-end buying period, underscoring widening pressures on consumers and businesses worldwide.
“Weak export growth likely reflects both poor external demand and supply disruptions due to the outbreaks of COVID,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, citing COVID-related disruptions at the Foxconn factory, a major Apple supplier. in Zhengzhou. an example.
Apple ( AAPL ) said it expects lower-than-expected shipments of high-end iPhone 14 models after a significant production cut at a factory in virus-hit China.
“Looking ahead, we believe that exports will decline further in the coming quarters. The shift in global consumption patterns that boosted demand for consumer goods during the pandemic will likely continue to ease,” said Zichun Huang, an economist at Capital Economics.
“We believe that aggressive economic tightening and a slowdown in real incomes from high inflation will push the global economy into recession next year.”
Nearly three years into the pandemic, China has persisted in a strict policy of containing COVID-19 that has exacted a heavy economic toll and caused widespread frustration and fatigue.
October’s weak factory and trade data suggest the world’s second-largest economy is struggling to climb out of the doldrums in the final quarter of 2022 after reporting a faster-than-expected recovery in the third quarter.
Chinese policymakers pledged last week to prioritize economic growth and pursue reforms, allaying fears that ideology could take precedence as President Xi Jinping began a new leadership term and disruptive lockdowns continued without a clear exit strategy .
Lumpy domestic demand, weighed down by new COVID restrictions and lockdowns in October, as well as a cooling property market, is also weighing on imports.
Inbound shipments fell 0.7% from a 0.3% rise in September, below a forecast 0.1% increase — the weakest result since August 2020.
China’s soybean imports fell and coal imports slipped as strict pandemic measures and a property slump disrupted domestic output.
The overall trade data led to a slightly wider trade surplus of $85.15 billion, compared with $84.74 billion in September, missing a forecast of $95.95 billion.
