The grim data underscores the challenge for China’s policymakers as they continue pandemic prevention measures and try to deal with broad-based pressure from rising inflation, sweeping global interest rate hikes and a global slowdown. Outbound shipments in October shrank 0.3% from a year earlier, a sharp rebound from a 5.7% rise in September, official data showed on Monday, and well below analysts’ expectations for a 4.3 increase %. It was the worst performance since May 2020. The data suggest demand remains fragile overall and analysts warn of further gloom for exporters in the coming quarters, putting more pressure on the country’s manufacturing sector and the world’s second-largest economy struggling with persistent COVID-19 restrictions and lingering weakness real estate. Chinese exporters have not even been able to benefit from the prolonged weakening of the yuan since April and the key year-end shopping period, underscoring widening pressures on consumers and businesses worldwide. The yuan fell 0.4 percent on Monday from a one-week high against the dollar hit in the previous session, as weak trade data and Beijing’s pledge to continue with its strict zero-covid-19 strategy hurt sentiment. “Weak export growth likely reflects both poor external demand and supply disruptions due to the COVID outbreaks,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, citing as an example the COVID disruptions at a major Foxconn factory Apple supplier. . Apple Inc ( AAPL.O ) said it expects lower-than-expected shipments of high-end iPhone 14 models after a significant production cut at its virus-hit Zhengzhou factory. “Looking ahead, we believe exports will further decline in the coming quarters… We believe aggressive financial tightening and the burden on real incomes from high inflation will push the global economy into recession next year,” said Zichun Huang , economist at Capital Economics. Growth in auto exports in volume terms also slowed sharply to 60 percent year-on-year from 106 percent in September, according to Reuters calculations based on customs data, reflecting a shift from demand for goods to services in major economies. Total exports to the major markets of China, the United States and the European Union also fell in October, down 12.6% and 9% year-on-year, respectively. Reuters Graphics
INTERNAL SORROWS PREVENT GROWTH
Nearly three years into the pandemic, China has persisted in a strict policy of containing COVID-19 that has exacted a heavy economic toll and caused widespread frustration and fatigue. Weak October factory and trade data suggest the economy is struggling to pull itself out of the doldrums in the final quarter of 2022 after reporting a faster-than-expected recovery in the third quarter. The war in Ukraine, which has fueled an explosion of already high inflation worldwide, has added to geopolitical tensions and further curtailed business activity. Chinese policymakers pledged last week to prioritize economic growth and pursue reforms, allaying fears that ideology could take precedence as President Xi Jinping began a new leadership term and disruptive lockdowns continued without a clear exit strategy . Lumpy domestic demand, weighed down in part by new COVID restrictions and lockdowns in October, hurt importers. Inbound shipments fell 0.7% from a 0.3% rise in September, below forecasts for a 0.1% increase, marking the weakest result since August 2020. The harsh impact on demand from strict pandemic measures and falling property was also highlighted across a wide range of Chinese imports. Soybean purchases fell to eight-year lows last month, while copper imports eased and coal imports eased from a 10-month high in September. In addition to the global slowdown, fragile domestic consumption will put more pressure on China’s economy for some time to come, analysts say. “Weak domestic demand is the main constraint on China’s short-term recovery and long-term growth trajectory,” said Bruce Pang, chief economist at Jones Lang Lasalle. Reporting by Ellen Zhang and Ryan Woo. Edited by Shri Navaratnam Our Standards: The Thomson Reuters Trust Principles.
