The Chinese exports were contracted in October for the first time since mid-2020, customs authorities reported Monday, in a context of internal slowdown and threat of global recessionwhich dented demand and further dimmed the outlook for a struggling economy, as well as the regime’s COVID restrictions.
These grim data highlight the challenge which they face China‘s monetary policy makerswhich continue with pandemic prevention measures and try to weather rising inflation, global interest rate hikes and a global recession.
Shipments abroad in October decreased by 0.3% compared to the previous yearwhich means a abrupt change compared to the 5.7% increase in September, official data showed on Monday, and well below analysts’ expectations of an increase of 4.3%. It was the worst data since May 2020.
The data suggests that demand remains fragile overall, with analysts warning of a greater uncertainty for exporters in the coming quartersadding to the pressure on the country’s manufacturing sector and the world’s second-largest economy grappling with persistent COVID-19 restrictions and prolonged housing weakness.
Chinese exporters were not even able to take advantage of the prolonged weakening of the yuan from April and key year-end shopping seasonhighlighting the growing tensions for consumers and businesses around the world.
The yuan fell from more than a week’s highs hit against the dollar in the previous session on Monday, as weak trade data and Beijing’s promise to continue its strict policy of ‘zero COVID‘ hurt sentiment.
“The weak export growth probably reflects both the low external demand such as supply disruptions due to COVID outbreaks,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, citing COVID disruptions at a factory at Foxconn, one of Apple‘s major suppliers, as an example.
Manzana said he expects shipments of the high-end models from the iPhone 14 are lower than expected after a key production cut in the Zhengzhou plantaffected by the virus.
“Looking ahead, we believe that exports will continue to fall in the coming quarters… We believe that aggressive financial tightening and stagnant real incomes due to high inflation will push the global economy into recession next year” said Zichun Huang, an economist at Capital Economics.
Auto export growth in volume terms also slowed sharply, to 60% year-on-year from 106% in September, according to calculations by Reuters based on customs data, reflecting a transition from demand for goods to services in major economies.
INTERNAL PROBLEMS STOP GROWTH
After almost three years of the pandemic, China has stuck to a strict COVID-19 containment policy that has been charged high economic price and has caused a general frustration and tiredness.
Weak factory and trade figures for October suggest the economy is struggling to pull through in the final quarter of 2022, having reported a faster-than-expected rebound in the third quarter.
The ukrainian warwhich caused an uptick in already high global inflation, has added to geopolitical tensions and further dampened business activity.
Chinese leaders pledged last week to prioritize economic growth and press ahead with reforms, allaying fears that continuous lockdowns would continue with no clear exit strategy in sight as President Xi Jinping began a new term in office. leadership.
The low domestic demandweighed down in part by new COVID restrictions and lockdowns in October, hurt importers.
Incoming shipments decreased 0.7% from a 0.3% increase in September, below an expected 0.1% increase, marking the weakest result since August 2020.
The harsh impact on demand from the strict anti-pandemic measures and the housing slump was also apparent across a wide range of Chinese imports; soybean purchases fell to eight-year lows last month, while imports of copper and coal also fell.
In addition to the global slowdown, fragile domestic consumption will put more pressure on the Chinese economy for a while, according to analysts.
“Insufficient domestic demand is the main obstacle to China’s short-term recovery and long-term growth trajectory,” said Bruce Pang, chief economist at Jones Lang Lasalle.
(With information from Reuters/By Ellen Zhang and Ryan Woo)
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