CONCLUSION 4-China’s trade contracts unexpectedly as COVID dampens, global slowdown shakes up demand


(Updates yuan levels, adds overall exports to US and EU)


China’s October exports, imports decline unexpectedly


Fragile data deals further blow to struggling economy


Global recession risks and COVID curbs in China cloud outlook


Analysts expect further weakness in exports and imports

By Ellen Zhang and Ryan Woo

BEIJING, Nov 7 (Reuters) – China’s exports and imports contracted unexpectedly in October, the first simultaneous recession since May 2020, as a perfect storm of COVID curbs at home and recession risks have weighed on demand and further clouded the outlook for a struggling economy.

The grim data highlights the challenge for policymakers in China as they pursue pandemic prevention measures and try to cope with widespread pressure from soaring inflation, sweeping increases in interest rates global interest and a global slowdown.

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.

Data suggests demand remains fragile overall, and analysts warn of further gloom for exporters in the coming quarters, further adding pressure on the country’s manufacturing sector and the world’s second-largest economy struggling with ongoing restrictions. from COVID-19 and prolonged property weakness.

Chinese exporters have not even been able to capitalize on a prolonged weakening of the yuan currency since April and the key year-end shopping season, underscoring growing tensions for consumers and businesses around the world.

On Monday, the yuan eased 0.4% from an over-week high against the dollar hit in the previous session as weak trade data and Beijing’s promise to continue its strict strategy of zero-COVID hurt sentiment.

“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 in a Foxconn factory, a major supplier to Apple, as an example. .

Apple Inc said it expects lower-than-expected shipments of high-end iPhone 14 models following a key production cut at the virus-stricken Zhengzhou factory.

“Looking ahead, we believe exports will decline further in the coming quarters…We believe that aggressive financial tightening and slowing real incomes due to high inflation will push the global economy into a recession next year,” said Zichun Huang, an economist at Capital Economics.

Automotive export growth in volume terms also slowed sharply to 60% year-on-year from 106% in September, according to Reuters calculations based on customs data, reflecting a shift in demand for goods to services in the major savings.

Overall exports to major Chinese markets of the United States and the European Union also fell in October, falling 12.6% and 9% respectively year-on-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 October factory and trade figures suggest the 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.

The war in Ukraine, which triggered a spike in already high inflation globally, heightened geopolitical tensions and further dampened business activity.

Chinese policymakers pledged last week to prioritize economic growth and pursue reforms, easing fears that ideology could take over as President Xi Jinping begins a new term in office and governments Disruptive lockdowns continue with no clear exit strategy in sight.

Tepid domestic demand, partly weighed down by new COVID restrictions and shutdowns in October, hurt importers.

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

The severe impact on demand from strict pandemic measures and a real estate slump was also evident across a wide range of Chinese imports; soybean purchases fell to their lowest level in eight years last month, while copper imports fell and coal imports slowed after hitting a 10-month high in September.

In addition to the global slowdown, the fragility of domestic consumption will put even more pressure on the Chinese economy for some time, analysts said.

“Insufficient domestic demand is the main constraint to China’s short-term recovery and long-term growth trajectory,” said Bruce Pang, chief economist at Jones Lang Lasalle.

(Reporting by Ellen Zhang and Ryan Woo; Editing by Shri Navaratnam)


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