China's imports and exports unexpectedly fell in October 2022, the first simultaneous decline since May 2020, as rising interest rates and soaring inflation battered global demand while new COVID-19 restrictions hampered domestic output and spending. The dismal October trade numbers highlight the problem for Chinese policymakers as exports had been one of the few bright spots for the faltering economy.
According to China’s General Administration of Customs, China's exports to the rest of the world dropped 0.3% in October 2022 compared with a year earlier, the slowest rate of growth since May 2020, when trade was constrained by countries' early attempts to contain an escalating global pandemic. China's imports from the rest of the world decreased 0.7% in October 2022 compared to a year earlier, highlighting the economy's sluggish domestic expenditure.
Exports to the European Union decreased 9%, while exports to the United States were down 13% year over year in October 2022. A combination of weak external demand and supply chain disruptions brought on by COVID-19 outbreaks is probably the cause of the sluggish export growth. The Chinese economy had been supported by exports, but growth had slowed recently. As the global economy loses impetus, other Asia-based bellwether exporters like Taiwan and South Korea have also reported sagging international sales.
Covid-19 lockdowns have harmed economic activity throughout the year, and the fear of additional steps to snuff out even the smallest Covid-19 outbreaks makes consumers and businesses unwilling to invest, adding to the drag from a deflated property bubble. The Russia-Ukraine conflict, which caused an increase in already high inflation globally, has added to geopolitical tensions and slowed down business activity even more. For China, the abrupt decline in foreign demand for its commodities removes crucial support for growth at a time when the government's zero-tolerance policy on Covid-19 and a severe real estate collapse are exerting pressure on its economy.
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