China’s exports experienced a steeper decline than anticipated in October, reflecting the challenges faced by the world’s second-largest economy due to weakening global demand and a slow domestic recovery. The Chinese government has been working to stimulate economic activity in response to a significant property crisis and reduced consumption since abandoning its strict zero-Covid policy at the end of the previous year.
In October, exports, which have traditionally been a major driver of China’s economic growth, contracted by 6.4 percent year-on-year, according to data from the General Administration of Customs. This figure was considerably worse than the 3.5 percent decline forecasted by economists in a Bloomberg survey and slightly worse than the previous month.
With the exception of a brief rebound in March and April, China’s exports have been on a continuous decline since October of the previous year. According to Zhang Zhiwei of Pinpoint Asset Management, “Export growth remained sluggish as the economic momentum in the United States and Europe slowed,” and he noted that external demand is likely to remain weak in the coming months.
On the other hand, imports increased by 3.0 percent, defying expectations of a 5.0 percent decline and marking the first year-on-year growth since late in the previous year. This rise in imports may indicate a potential recovery in domestic demand within China, which has been weak for several months.
However, Zhang cautioned that the October increase in imports alone is insufficient to confirm a substantial improvement in domestic demand, and he suggested examining other indicators, such as retail sales. He also mentioned that “as fiscal policy has turned more proactive, a recovery in domestic demand is likely in the coming months.”
China’s economic growth in the third quarter was moderate, and Beijing is aiming to achieve its official target of “around five percent” expansion for 2023, one of the lowest targets in recent years. In response to economic challenges, the Chinese government has announced measures like issuing sovereign bonds and targeted stimulus efforts for specific sectors, particularly the struggling property market.
While China experienced deflation in July for the first time since 2021, it modestly rebounded in August. Nonetheless, analysts have cautioned that a relapse in the coming months remains a possibility.
