China’s Trade Shrinks as COVID-19 Restrictions, Global Slowdown Affect Demand – Nationwide

China’s imports and exports unexpectedly contracted in October, the first simultaneous decline since May 2020. This is because the perfect storm of his COVID-19 containment at home and the risk of a global recession will dampen demand and further dim the outlook for a sluggish economy.

Grim data highlights challenges for Chinese policymakers in pushing ahead with pandemic prevention measures and weathering the broader pressures from rapid inflation, sharp rises in global interest rates and a global economic slowdown. .

Outbound shipments fell 0.3% year-on-year in October, rebounding sharply from a 5.7% rise in September, well below analyst expectations for a 4.3% increase, official data showed Monday. increase. It was the worst performance since May 2020.

Data suggest demand remains weak overall, with analysts warning of further pessimism for exporters over the next few quarters, with the country’s manufacturing sector and sustained COVID-19 containment is further adding to pressure on the world’s second-largest economy, which is grappling with a lingering real estate weakness.

Chinese exporters have not even been able to capitalize on the continued depreciation of the yuan since April and the crucial year-end shopping season, underscoring growing tensions among consumers and businesses around the world.

The yuan fell 0.4% on Monday from more than a week high against the dollar reached in the previous session. This is because weak trade data and Beijing’s pledge to continue its stringent zero-COVID strategy hurt sentiment.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, cited the coronavirus-induced disruptions at factories at Apple’s main supplier Foxconn as an example. It likely reflects both supply disruptions due to the COVID outbreak.” .

Apple said it expected shipments of its high-end iPhone 14 models to fall short of expectations after major production cuts at its Zhengzhou factory hit by the coronavirus.

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“Looking ahead, we believe exports will decline further in the next few quarters… Aggressive monetary tightening and high inflation lowering real incomes will see the global economy thrive next year,” said Zhichung Huang, an economist at Capital Economics. “I think we’re going into a recession,” he said. .

Vehicle export growth also slowed sharply to 60% from 106% in September, reflecting a shift in demand for goods from demand for services in major economies, according to Reuters calculations based on customs data.

Overall exports to China’s main markets, the United States and the European Union, also fell in October, down 12.6% and 9% year-on-year, respectively.

Almost three years after the pandemic, China is still sticking to its strict COVID-19 containment policies, wreaking havoc on its economy and causing widespread discontent and fatigue.

Weak October factory and trade numbers suggest the economy is struggling to pull itself out of the quagmire in the fourth quarter of 2022 after reporting a faster-than-expected recovery in the third quarter.

The Ukraine war has caused already high inflation to spike globally, heightened geopolitical tensions and further slowed business activity.

Chinese policymakers last week pledged to prioritize economic growth and push ahead with reforms, President Xi Jinping launched a new leadership term, and a devastating lockdown continued with no clear exit strategy in sight. This has allayed concerns that ideology would take precedence.

Weak domestic demand, partially weighed down by new COVID controls and lockdowns in October, took a toll on importers.

Inbound shipments fell 0.7% from September’s 0.3% increase, below the forecast of 0.1% increase, marking the weakest result since August 2020.

The severe impact on demand from strict pandemic measures and a downturn in real estate was also highlighted in a wide range of Chinese imports. Soybean purchases fell to an eight-year low last month, copper imports fell, and coal imports slumped after hitting a 10-month high in September.

Analysts say weak domestic consumption, along with a global economic slowdown, will put further strain on China’s economy for the foreseeable future.

Bruce Pang, chief economist at Jones Lang LaSalle, said: “Insufficient domestic demand is the main constraint on China’s near-term recovery and long-term growth trajectory.