China’s exports and imports contracted unexpectedly in October, the first simultaneous recession since May 2020, as soaring inflation and rising interest rates hammered global demand as new COVID-19 restrictions at home have disrupted production and consumption.
October’s dismal trade figures highlight the challenge for policymakers in China, as exports have been one of the few bright spots in the struggling economy.
Outbound shipments in October were down 0.3% from a year earlier, a sharp turnaround from a 5.7% gain in September, official data showed on Monday, and well below market expectations. analysts for a 4.3% increase. This is the worst performance since May 2020.
The data suggests that demand remains fragile overall, putting additional pressure on the country’s manufacturing sector and threatening any meaningful economic recovery in the face of lingering COVID-19 drags, prolonged housing weakness and global recession risks.
Chinese exporters have not even been able to take advantage of a further weakening of the yuan currency and the key to the end-of-year shopping season, underscoring growing tensions for consumers and businesses around the world. whole world.
“Weak export growth likely reflects both weak external demand and supply disruptions from COVID outbreaks,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, citing COVID disruptions to 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 following a key production cut at a virus-hit factory in China.
“Looking forward, we believe exports will continue to decline over the next few quarters. The shift in global consumption patterns that has driven up demand for consumer goods during the pandemic will likely continue to dissipate,” Zichun said. Huang, an economist at Capital Economics.
“We believe that aggressive financial tightening and slowing real incomes due to 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.
October’s weak factory and trade figures suggest the world’s second-largest economy is struggling to emerge from the quagmire in the final quarter of 2022, after signaling a faster-than-expected rebound in the third quarter.
Chinese policymakers pledged last week to prioritize economic growth and continue reforms, easing fears that ideology could take over as President Xi Jinping begins a new term as head of government and that the disruptive lockdowns continued with no clear exit strategy in sight.
Tepid domestic demand, weighed down by new COVID restrictions and shutdowns in October as well as a cooling property market, also hurt imports.
Inbound shipments fell 0.7% from a 0.3% gain in September, below a forecast increase of 0.1% – the weakest result since August 2020.
Chinese soybean imports fell and coal imports fell as strict pandemic measures and a housing crisis disrupted domestic production.
Headline trade figures resulted in a slightly larger trade surplus of $85.15 billion, up from $84.74 billion in September, missing a forecast of $95.95 billion.