China's Exports Fall Sharply As The Global Economy Slows

SINGAPORE – China’s exports to the rest of the world contracted unexpectedly in October, a sign that global trade is falling sharply as consumers and businesses cut spending in response to aggressive central bank measures to curb inflation.

The slump in exports from the world’s factories is adding to the gloom surrounding the global economy as leaders of the Group of 20 developed and developing countries prepare to meet in Indonesia next week.

A buoyant US job market is showing signs of cooling as the Federal Reserve hikes interest rates to curb high inflation. Many economists expect a US recession within the next 12 months.

Europe braces for a difficult winter after Russia decided to cut energy supplies in response to sanctions over the war in Ukraine. The European Central Bank raised interest rates by three-quarters of a percentage point last month for the second consecutive month, but signaled growing concerns about economic growth and sparked speculation among investors that it may soon be slowing the pace of rate hikes.

For China, the world’s second-largest economy, the sharp drop in overseas demand for its goods removes a key pillar of growth at a time when its economy is being squeezed by the government’s zero-tolerance approach to Covid-19 and a heavy real estate market stands burglary.

“It’s almost like it doesn’t have a leg to stand on,” said Steve Cochrane, chief economist for Asia Pacific at Moody’s Analytics in Singapore.

Chinese health officials said on Saturday that China would stick to its strict Covid prevention strategy, shattering hopes that had been building over the past few days for an easing of strict pandemic measures following a closely watched Communist Party congress last month.

With growth slowing in the US, Europe and China, economists are pessimistic about the outlook for the global economy this year and next. The International Monetary Fund warned last month that “the worst is yet to come” and expects global gross domestic product to grow 3.2% this year before slowing to 2.7% in 2023.

The slowdown in Chinese exports “is a worrying sign for global growth,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics in London.

Exports from China fell 0.3% year-on-year last month, China’s customs administration said Monday, the weakest pace of growth since May 2020, as trade slacked on countries’ early efforts to contain a worsening global pandemic was disabled. That was well below expectations of economists polled by the Wall Street Journal, who had expected exports to rise 4% year over year.

Data on Monday showed exports to the United States fell 13% year-on-year in October, the third month of the contraction, while sales to the European Union fell 9%.

The data showed sharp declines in exports of products, including home appliances and medical supplies, and weaker growth in mobile phone and automobile exports.

Other top exporters in Asia, such as South Korea and Taiwan, have also reported faltering overseas sales, suggesting a broad slowdown in trade as the global economy loses momentum.

South Korea’s Commerce Ministry said Nov. 1 that exports fell 5.7% in October from a year earlier, led by falling exports of memory chips, petrochemicals and computers.

The cost of shipping containers of goods around the world has fallen in recent months as consumers shy away from squandering gadgets and home improvement while stuck at home in the depths of the pandemic. Prices for shipping goods from Asia to the US West Coast last week were 87% lower than at the same time last year, according to data from online freight marketplace Freightos. Cruise lines are canceling dozens of sailings on the world’s busiest routes during the normal peak season.

The data showed weaker growth in Chinese exports of mobile phones and automobiles.

Photo: Cfoto/Zuma Press

The fall in Chinese exports in October followed several months of slowing growth. Exports rose at an annual rate of 5.7% in September, down from the double-digit pace Chinese exports recorded mid-year.

China’s imports from the rest of the world fell 0.7% yoy in October, underscoring the Chinese economy’s weak domestic spending.

That was also weaker than flat import performance expected by economists, meaning China’s October trade surplus widened to $85.15 billion from September’s $84.7 billion.

Zichun Huang, an economist at Capital Economics, said in a note to clients on Monday that he expects Chinese exports to fall further in the coming months as the global economy moves closer to a recession.

Slowing exports aren’t the only headwind for the world’s second-biggest economy.

Lockdowns have hampered economic activity throughout the year and the threat of further action to contain even the smallest Covid-19 outbreaks means consumers are reluctant to spend and businesses are reluctant to invest, adding to the strain of a deflationary housing bubble .

Economists say China is poised to fall well short of officials’ earlier target of growing 5.5% this year and likely post its worst 12 months for growth — barring the first year of the pandemic — in decades.

Xiao Xiao in Beijing contributed to this article.

Write to Jason Douglas at [email protected]