Surprising drop in China’s imports and exports

Both China’s exports and imports fell unexpectedly for the first time in more than two years, as the risk of a global recession pressured demand and problems such as zero covid and the housing crisis affected domestic demand.

According to data released today by the China Customs Administration, dollar-denominated exports fell 0.3 percent in October compared with a year earlier. Expectations were for a 4.5 percent increase.

Imports, for their part, had the worst performance since August 2020, with a 0.7 percent drop compared to the same period of the previous year. China had a trade surplus of $85.15 billion in October.

In yuan terms, China’s foreign trade rose 9.5 percent year on year to 34.62 trillion yuan (about 4.79 trillion US dollars) in the first ten months of the year. Exports rose 13 percent year on year to 19.71 trillion yuan, while imports rose 5.2 percent year on year to 14.91 trillion yuan. The yuan has lost almost 15 percent of its value against the dollar since the beginning of the year.

INCREASING RISKS

Shu Jueting, a spokesman for China’s Ministry of Commerce, said last month that “the risk of a slowdown in foreign demand growth has increased” in the fourth quarter. Noting that China’s business environment is becoming more complex and uncertainties are increasing, Shu drew attention to the slowdown in global economic and trade growth.

The strict measures taken by China due to its zero Covid policy are a big concern on demand and production. While this strategy dampens hopes of an improving economic situation, it also encourages Chinese households to save at a record pace and cut spending.