China’s exports fell in October, the first drop since mid-2020, according to customs officials, as a domestic slowdown and the threat of a global recession weighed on international trade.
According to the General Administration of Customs, exports fell 0.3 percent year on year in October, a sharp drop from September’s 5.7 percent increase and well below analysts’ expectations. Imports fell 0.7 percent year on year in October, falling for the first time since March of this year and falling from 0.3 percent growth in September.
The trade slowdown comes as global demand for Chinese products falls, energy prices rise, and the United States faces recession. Sporadic Covid-19 lockdowns have also dampened consumer and business enthusiasm in the world’s second-largest economy.
Bloomberg polled analysts, who predicted 4.3 percent growth in exports in October but only 0.1 percent growth in imports due to weak domestic demand.
“The recent drop in export volumes appears to reflect a reversal in the pandemic-era surge in global demand for Chinese goods,” Capital Economics analyst Zichun Huang wrote on Monday.
According to Huang, import volumes are “likely to continue weakening given the challenging domestic outlook.”
Domestic challenges – On Monday, Nomura analysts predicted that China’s export slump would last another two months.
“Because strong export growth has been the single-largest GDP growth driver in China since spring 2020,” they said, “export contraction will inevitably weigh on growth, employment, and investment.”
China’s factory activity fell in October, according to official data released last week, which the National Bureau of Statistics attributed to virus outbreaks last month.
Factory activity has been declining for the first six months of the year, as sweeping Covid restrictions have paralyzed major industrial cities like Shanghai, Shenzhen, and Chengdu.
Apple issued a shipment delay warning on Monday after Covid restrictions “temporarily impacted” production at its massive factory in Zhengzhou, central China.
Despite reporting a better-than-expected 3.9 percent expansion in the third quarter, Chinese leaders have set an annual economic growth target of around 5.5 percent, which many observers believe the country will struggle to meet.
It is the last major economy committed to eradicating Covid outbreaks as they occur, imposing emergency lockdowns, mass testing, and lengthy quarantines despite widespread disruption to businesses and international supply chains.
The National Health Commission (NHC) spokesperson Mi Feng said on Saturday that Beijing would “stick unswervingly to… the overall policy of dynamic zero-Covid.”
According to Nomura, authorities had imposed enhanced virus controls on a total area accounting for more than 10% of China’s overall GDP as of Thursday.