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

  • China’s worst exports since February 2020, forecast missed
  • Imports have fallen sharply since May 2020 due to reduced demand
  • The slowdown of the global economy, the problems caused by the Covid in China bring a lot of pressure
  • Politburo to respond to key domestic demand drivers in 2023, analyst says

BEIJING, Dec 7 (Reuters) – China’s exports and imports fell in November at their steepest pace in at least 2 1/2 years, as weak global and domestic demand, production disruptions from Covid-19 and a domestic property slump weighed heavily. imported into this country. The second largest economy in the world

The recession was far worse than markets had anticipated, and economists are predicting a further period of export contraction, underscoring a sharp pullback in global trade as consumers and businesses respond to aggressive central bank measures to curb inflation. They reduce costs.

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

Beijing is moving to ease some of its draconian restrictions during the pandemic, but exports have pushed the global economy to the brink of recession since August due to rising inflation, massive interest rate hikes in many countries and the Ukraine crisis.

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Julian Evans-Pritchard, chief China economist at Capital Economics, said in a note: “Exports are likely to decline further in the next quarter.”

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

Much bigger implications will be the decline in global demand for Chinese goods due to the reversal of pandemic-era demand and the coming global recession.

In response to widespread pressures on China’s economy, Chinese state media reported on Wednesday that the ruling Communist Party’s high-level meeting held yesterday emphasized that the government’s focus in 2023 is on stabilizing growth, promoting domestic demand and opening up the economy. It will be the market. the outside world

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

Reuters graphic

“Rough Reopening”

Almost three years of controlling the pandemic have taken a heavy economic toll and caused widespread frustration and exhaustion in China.

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Widespread COVID restrictions also hurt importers. Inbound shipments fell sharply to 10.6 percent from a 0.7 percent drop in October, weaker than the 6.0 percent decline expected. The decline was the worst since May 2020, partly reflecting the high base for comparison last year.

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

This led to a trade surplus of $69.84 billion, compared with a surplus of $85.15 billion in October and the lowest figure since April, when Shanghai was under lockdown. Analysts had predicted a surplus of $78.1 billion.

The government has responded to weakening economic growth by implementing a series of policy measures in recent months, including reducing the amount of cash banks must hold as reserves and loosening funding restrictions to rescue the real estate sector.

But analysts are skeptical that these steps can achieve quick results, as full easing of pandemic controls will take longer and domestic and foreign demand remain weak.

Many businesses are struggling to recover, while last week’s surveys of factory activity in China and globally suggested more difficult months ahead.

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Apple supplier Foxconn ( 2317.TW ) said revenue fell 11.4 percent in November from a year earlier, after production problems related to COVID-19 control at the world’s largest iPhone factory in Zhengzhou.

“Moving from zero Covid and increasing support for the property sector will eventually improve domestic demand, but probably not until the second half of next year,” Evans-Pritchard said.

With China’s yuan falling sharply this year, policymakers’ room for maneuver has also been limited as heavy domestic monetary policy stimulus at a time of rapidly rising global interest rates could trigger large-scale capital outflows.

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

China’s economy grew by 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%.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, warned of China’s “uneven reopening” process.

He said: With global demand decreasing in 2023, China will have to rely more on domestic demand.

Reporting by Ellen Zhang and Ryan Wu. Edited by Shri Navaratnam

Our Standards: The Thomson Reuters Trust Principles.

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