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The most evident sign of a global economic slowdown has now emerged as China exports unexpectedly fell by 0.3% in October from a year ago, missing an estimation by Reuters of a 4.3% growth. This is the first time since May 2020 that exports from China declined.
Recently released trade data by China’s customs office showed that domestic demand also suffered, with imports contracting 0.7% in USD terms, the missing expectation for a slight growth of 0.1%.
A turning point for China exports?
China, often dubbed the world’s factory, with its declining exports shows the impact of the global slowdown. Specifically, exports to the US and Europe declined, by 12.6% and 9%, respectively. The US is China’s largest trading partner.
The weak export data now raises the question of whether China will continue with its zero-Covid policy, tackle inflation with monetary policy tweaks and ease curbs on the property sector.
However, China’s exports to ASEAN countries jumped by 20% and imports from the region rose 4.5% in October over the previous year, indicating the shift in supply chains.
Category-wise, China’s exports of household appliances plunged over 20%, exports of toys declined about 18% and shoe exports saw a contraction of 11%. On the other hand, crude oil imports during the month of October rose 14% over the previous year, while coal imports grew by 8%.
“We can blame the Golden Week holiday in China for the monthly contraction in exports and imports but the holiday does not have any seasonal effect on the year-on-year data. As such, the contraction in international trade activity in October stems from other factors,” says ING in a note.
The impact of semiconductor export curbs imposed by the US has started to be reflected in China’s trade figures. Chip imports by the country fell over 13% in the first 10 months of 2022. This is significant as China’s chip imports have long surpassed imports of crude oil and bulk commodities.
However, some of this downturn can also be attributed to the slowdown in demand while the semiconductor market is in a glut. The Semiconductor Industry Association (SIA) said that chip sales around the globe had declined by 3% in September.
Meanwhile, China’s factory activity for the month of October also suffered, impacted by Covid-19 restrictions and lower demand. The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) stood at 49.2 in October, up from 48.1 in September.
