China’s trade suffers worst slump in 2-1/2 yrs as COVID woes, feeble demand take toll

  • China’s exports worst since February 2020, misses forecast
  • Imports fell the most since May 2020 on sluggish demand.
  • The global economic slowdown, China’s covid added to the pressure.
  • Analysts say the politburo addresses the key driver of domestic demand in 2023.

BEIJING, Dec 7 (Reuters) – China’s exports and imports contracted at their fastest pace in at least 2-1/2 years in November, as weak global and domestic demand, Covid-led production disruptions and at home Due to the lack of property, China was under pressure. The second largest economy in the world.

The recession was worse than markets had predicted, and economists are predicting another round of falling exports, signaling a sharp pullback in global trade as central banks aggressively try to control inflation. Consumers and businesses cut spending in response to the measures.

Exports fell 8.7 percent in November from a year earlier, a sharp decline from a 0.3 percent loss in October and marking the worst performance since February 2020, official data showed on Wednesday. They were well below analysts’ expectations for a 3.5% decline.

Beijing has been moving to ease some of its stricter pandemic-era restrictions, but outbound shipments have lost steam since August as inflation, sharply rising interest rates in many countries and Ukraine’s The crisis has pushed the global economy to the brink of recession.

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Capital Economics senior China economist Julian Evans Pritchard said in a note that exports are likely to decline further in the coming quarters.

“Outbound shipments will get a limited boost from (China’s) easing of virus restrictions, which are no longer a major constraint on manufacturers’ ability to fulfill orders,” he said.

“The overarching consequence will be a decline in global demand for Chinese goods due to a pandemic-era demand reversal and an impending global recession.”

In response to mounting pressure on China’s economy, state media reported on Wednesday that a high-level meeting of the ruling Communist Party yesterday stressed that the government’s focus in 2023 should be to stabilize growth. , will focus on promoting domestic demand and openness. the outside world.

“Last day’s Politburo meeting pointed to domestic demand as the main driver of growth for next year, and fiscal policy to support demand,” said Hao Zhou, chief economist at Gotai Junan International. will remain active.”

Reuters Graphics

‘Bumpy Reopening’

Nearly three years of epidemic control have taken a heavy economic toll and led to widespread frustration and fatigue in China.

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The widespread COVID-19 lockdown also hurt importers. Inbound shipments were down 10.6% from a 0.7% decline in October, weaker than forecasts for a 6.0% decline. The decline was the worst since May 2020, also partly reflecting a higher year base for comparison.

Imports of soybeans and iron ore fell in November from a year ago, while imports of crude oil and copper rose.

This resulted in a trade surplus of $69.84 billion, down from a surplus of $85.15 billion in October and the lowest since April when Shanghai was under lockdown. Analysts had forecast a $78.1 billion surplus.

The government has responded to weakening economic growth with a wave of policy measures in recent months, including reducing the amount of cash held as reserves by banks and fiscal restrictions to save the property sector. involves reducing

But analysts are skeptical that these measures can achieve immediate results, as the full relaxation of epidemic control will take more time and domestic and external demand is weak.

Many businesses are struggling to recover, while surveys of factory activity in China and globally last week suggested several more months of tough grinding.

Apple supplier Foxconn ( 2317.TW ) said revenue fell 11.4 percent year-on-year in November after production problems related to Covid-19 controls at the world’s biggest iPhone factory in Zhengzhou.

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“Moving to zero-COVID and stepping up to support the property sector will eventually lead to a recovery in domestic demand but probably not until the second half of next year,” Evans-Pritchard said.

With the Chinese yuan already depreciating sharply this year, room for maneuver is limited for policymakers as heavy monetary policy stimulus at home amid rapidly rising global interest rates has fueled massive capital outflows. can activate.

The war in Ukraine, which has fueled already high global inflation, has intensified geopolitical tensions and further weakened the business outlook.

China’s economy grew just 3 percent in the first three quarters of this year, well below the annual target of about 5.5 percent. Full-year growth is widely expected by analysts to be just over 3 percent.

Xie Zhang, chief economist at Pinpoint Asset Management, warned of China’s “reopening of Bombay”.

He said China will have to rely more on domestic demand in 2023 as global demand weakens.

Reporting by Alan Zhang and Ryan Wu; Edited by Shri Navaratnam

Our Standards: Thomson Reuters Trust Principles.

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