China’s exports and imports unexpectedly slowed in October, the first simultaneous decline since May 2020, as rising inflation and rising interest rates hammered global demand while new COVID-19 curbs at home disrupted production and consumption.
The dismal trade figures from October highlight the challenge for policymakers in China, as exports had been one of the few bright spots for the struggling economy.
Outgoing shipments in October shrank 0.3% from a year earlier, a sharp turnaround from a 5.7% rise in September, official data showed on Monday, and well below analysts̵[ads1]7; expectations for a 4.3% increase. It was the worst performance since May 2020.
The data suggest demand remains weak overall, putting more pressure on the country’s manufacturing sector and threatening any meaningful economic revival in the face of persistent COVID-19 curbs, lingering property weakness and risks of global recession.
Chinese exporters were not even able to capitalize on a further weakening of the yuan currency and the key end-of-year shopping season, underscoring the mounting strains on consumers and businesses worldwide.
“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, citing COVID disruptions at the Foxconn factory, a major Apple supplier, in Zhengzhou as one example.
Apple ( AAPL ) said it expects lower-than-expected shipments of high-end iPhone 14 models after a key production cut at a virus-eradicated factory in China.
– Looking ahead, we believe that exports will fall further in the coming quarters. The shift in global consumption patterns that pushed up demand for consumer goods during the pandemic is likely to continue to relax, says Zichun Huang, economist at Capital Economics.
“We believe that aggressive fiscal tightening and the strain on real incomes from high inflation will push the global economy into recession next year.”
Nearly three years into the pandemic, China has stuck 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 emerge from the quagmire in the final quarter of 2022, after it reported a faster-than-expected recovery in the third quarter.
Chinese policymakers vowed last week to prioritize economic growth and push ahead with reforms, easing fears that ideology could take precedence as President Xi Jinping began a new term in office and disruptive shutdowns continued with no clear exit strategy in sight.
Lumpy domestic demand, weighed down by fresh COVID curbs and shutdowns in October, as well as the cooling real estate market, also hurt imports.
Incoming shipments fell 0.7% from a 0.3% rise in September, missing a forecast of a 0.1% rise – the weakest result since August 2020.
China’s soybean imports fell and coal imports fell, as strict pandemic measures and a property slump disrupted domestic production.
The overall trade figures resulted in a slightly larger trade surplus of $85.15 billion, compared with $84.74 billion in September, missing a forecast of $95.95 billion.