China trade: export growth suffers first drop in over 2 years, imports also down.

  • China’s exports declined by 0.3 per cent in October compared with a year earlier, down from 5.7 per cent growth in September
  • Imports declined by 0.7 per cent in October compared with a year earlier, down from 0.3 per cent growth in September

 

China’s exports declined in October for the first time since May 2020, data released on Monday showed.

Exports declined by 0.3 per cent last month from a year earlier to US$298.37 billion, compared with 5.7 per cent growth in September, according to the data released by China Customs.

The October figure was below expectations of a 3.7 per cent rise, according to Wind, a leading provider of financial information services in China. China’s exports last turned negative in May 2020 with a figure of minus 3.3 per cent.

Imports, meanwhile, declined by 0.7 per cent in October from a year earlier to US$213.22 billion, down from 0.3 per cent growth in September, and below expectations of a 0.1 per cent rise.

The weak export growth likely reflects both poor external demand as well as the supply disruptions due to Covid outbreaks
Zhang Zhiwei

China’s total trade surplus was US$85.15 billion in October compared with US$84.75 billion in September.

“China’s exports contracted slightly in October. This is the first negative growth since May 2020. The weak export growth likely reflects both poor external demand as well as the supply disruptions due to Covid outbreaks,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

“What happened in the Foxconn factory in Zhengzhou is one example. I expect export growth to remain weak in the next few months as global economy slows.
“I think there are early signs that the zero-Covid policy may be relaxed down the road, but the reopening will be a long and gradual process. The significant change of policies is likely to happen next year rather than this year.”

On Sunday, Apple said that the coronavirus lockdown at the Foxconn plant in China’s Zhengzhou province will affect production and shipments of iPhone 14 Pro and Pro Max lines for the coming holiday shopping season.

Last week, data had already shown that both China’s factory and services activity contracted in October, pointing to a “further loss of momentum” as coronavirus disruptions worsened and export orders remained under pressure.

The official manufacturing purchasing managers’ index (PMI) fell to 49.2, down from 50.1 in September, according to the National Bureau of Statistics (NBS). The 50-mark separates growth from contraction on a monthly basis.

The official non-manufacturing PMI, which measures business sentiment in the services and construction sectors, fell for the first time since May, dropping to 48.7 in October from 50.6 in September.

Within the manufacturing PMI, the output component fell from 51.5 to 49.6 amid weakening demand, while the new orders index dropped from 49.8 to 48.1 and export orders remained weak at 47.6.

On Sunday, Han Wenxiu, deputy director at the General Office of the Central Economic and Financial Affairs Commission, said that China still needs to regard development as the top priority and ensure a “reasonable growth” of the national economy in a persistent way.

“We must keep national economic growth within a reasonable range for a fairly long period so that the pie can get bigger, and people’s living standards can catch up with that of developed countries,” he wrote in an article included in Beijing’s official explanation of the guidelines released at the 20th party congress last month.

Last month, China confirmed its economy grew by 3.9 per cent in the third quarter, up from 0.4 per cent expansion in the second, but coronavirus restrictions, a prolonged property slump and global recession risks are weighting on the long-term outlook.

We expect exports to weaken further over the coming quarters as the global economy tips into a recessionCapital Economics

 

Premier Li Keqiang said that it had been “no easy feat” to ensure economic growth in the third quarter, but reiterated pledges to stabilise the economy and stimulate demand to lift growth in the final quarter of the year.

“China’s export volumes dropped back sharply in October, due to a deterioration in global economic conditions and a reversal in pandemic-related demand. We expect exports to weaken further over the coming quarters as the global economy tips into a recession,” said Zichun Huang and Julian Evans-Pritchard, China economists at Capital Economics.
“Import volumes declined again last month after falling significantly over the past year, and they are likely to continue weakening given the challenging domestic outlook.”

The 10 countries of the Association of Southeast Asian Nations (Asean) continued to be China’s largest trade partner, followed by the European Union and the United States.

China’s exports to Asean countries rose to US$48.9 billion in October, up by 20.3 per cent compared with a year earlier, while imports rose by 4.6 per cent to US$33.3 billion.
China’s exports to the European Union declined by 9 per cent from a year earlier to US$44.1 billion in October, while imports declined by 5.1 per cent to US$21.4 billion.
Imports from the US dropped by 1.5 per cent to US$12.8 billion in October, while exports fell by 12.6 per cent to US$47 billion.

China’s trade surplus with the US narrowed by 16.1 per cent from a year earlier to US$34.2 billion, down from US$36.1 billion in September.

In October, China’s import from Russia surged by 36 per cent to nearly US$10.2 billion, while exports rose by 34.6 per cent to US$7.4 billion. The trade deficit with Russia grew by almost 40 per cent to US$2.8 billion.

 

By Andrew Mullen and Ji Siqi. 7 Nov, 2022.
Source:  China Macro Economy. https://www.scmp.com/economy/economic-indicators/article/3198672/china-trade-export-growth-suffers-first-drop-over-2-years-imports-also-down. 13 November2022.

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