China's exports declined by 0.3% and imports by 0.7% in October compared with a year earlier, down from a 5.7% and 0.3% growth in September respectively. It is the first drop in foreign trade in over two years on weak demand and the effects of the zero-Covid policy. Foreign trade momentum is expected to weaken further in the coming months. “This marks a turning point for export growth,” according to Nomura Economists led by Lu Ting. Although China's exports may benefit from a weak yuan and deflation of the producer price index, those benefits could be more than offset by the global slowdown,” they added.
Export growth is expected to slip further to minus 4% year-on-year in the last two months of the year. As exports are the single largest driver of GDP growth, the contraction will inevitably weigh on growth, employment and investment, while authorities might even reconsider property curbs. “Nevertheless, we continue to expect no major policy changes in the zero-Covid strategy and the property sector at least until March 2023, Nomura Economists said. Zhang Ziwu, Chief Economist at Pinpoint Asset Management added that he expected export growth to remain weak in the next few months as the global economy slows.
The 10 countries of Association of Southeast Asian nations (ASEAN) continued to be China's largest trade partner, with exports up 20.3% and imports up 4.6% in October year-on-year. Exports to the EU declined by 9%, while exports to the U.S. fell by 12.6%. China's total trade surplus was USD85.15 billion in October, compared with USD84.75 billion in September, the South China Morning Post reports.
