With an economy still gripped by strict lockdown measures, Chinese exports contracted in October for the first time since the early stages of the Covid-19 pandemic. Exports in dollar terms fell 0.3 percent year on year last month, official data showed, compared with an economists’ forecast of 4.5% growth and a 5.7% gain in September. The figure last fell in May 2020.
Shipments from China to the United States fell 13% a year in October, the third month of decline, while sales to the European Union (EU) dropped 9%. China’s trade has supported its economy throughout the pandemic. Its exports rocketed in 2020 and 2021 as global markets shifted to buying goods rather than services.
But the latest data highlight the country’s exposure to a global slowdown as other big economies raise interest rates to tackle higher inflation. Unlike China, most countries have largely removed Covid restrictions.
Declining Chinese exports add to pessimism about the world economy as leaders of the world’s 20 most advanced countries (G-20) prepare for a meeting in Indonesia next week.
A buoyant US labor market is showing signs of cooling off as the Federal Reserve (Fed) raises interest rates to contain inflation. As a result, many economists expect a recession in the country in the next 12 months.
Europe braces for a rough winter after Russia decided to strangle energy supplies in response to sanctions imposed over the war in Ukraine. The European Central Bank (ECB) raised interest rates by 0.75 percentage points for the second time in a row in October but signaled more concerns about the economy’s growth, leading to speculation among investors that it may soon slow the pace of interest rate increases.
For China, the world’s second-largest economy, the sharp drop in demand for its products abroad eliminates an important engine of growth at a time when the country’s economy is under pressure from the “covid-zero” policy and a severe financial situation in the real estate industry.
“It’s almost as if China doesn’t have where to support itself,” said Steve Cochrane, chief economist at Moody’s Analytics in Singapore.
Chinese health officials said on Saturday that the country would stick to its strict Covid-19 strategy, dashing hopes of easing Covid policy after the Communist Party congress last month.
With growth slowing in the United States, Europe, and China, economists are pessimistic about the global economy’s prospects for this year and next. Last month, the International Monetary Fund (IMF) warned that “the worst is yet to come,” predicting that global GDP will grow by 3.2% this year before falling to 2.7% in 2023.
According to Duncan Wrigley, Pantheon Macroeconomics’ chief China economist, the slowdown in Chinese exports “is a worrying sign for global growth.”
Zichun Huang, an economist at Capital Economics, said in a note to clients that he expected Chinese exports to fall further in the coming months as the global economy approaches recession. The “covid-zero” lockdowns hampered economic activity throughout the year.