China’s exports unexpectedly contracted last month as weakening global demand failed to offset the slump in shipments to the US, dealing a blow to an economy already slowing amid sluggish consumer spending and investment at home.
Exports fell for the first time in eight months, dropping 1.1 percent from a year earlier, according to official data released yesterday. Shipments to all nations except the US rose 3.1 percent, not enough to compensate for the more than 25 percent decline to the US.
“The exporters in China have been frontloading their trade in order to avoid high tariffs in the US — it seems the frontloading finally faded in October,” said Zhang Zhiwei (張智威), chief economist at Pinpoint Asset Management, a Chinese hedge fund management firm. “Exports have been a key pillar for growth in China due to the weak domestic demand. Now that export momentum weakens, China needs to rely more on domestic demand.”
Photo: AFP
Chinese exports have been resilient, as other destinations made up for drops in shipments across the Pacific Ocean. Sales abroad had grown every month since February, when activity slowed because of the Lunar New Year holiday.
October marked a break in the trend of growth driven by the pursuit of new markets among Chinese companies. A range of trade indicators started to cool off from the record numbers seen in earlier months, with the Port of Shanghai processing the fewest containers since April.
The decline in overall exports last month came as a surprise to almost all forecasters, with the median estimate of those polled by Bloomberg at 2.9 percent. Only a single analyst in the survey had predicted a decline.
With the US reducing tariffs on Chinese goods by 10 percent from Monday, it is possible trade between the world’s two largest economies could see a pickup through the year-end.
However, the effect might prove limited because duties on Chinese goods are still higher than those on products from countries such as Vietnam.
And if the slowdown in demand from the rest of the globe continues, that could pull down shipments and the broader economy in the final two months of the year. Last quarter, China’s economic growth decelerated to the weakest pace in a year even as exports boomed.
It risks an even steeper slowdown in the months ahead. Analysts forecast the weakest growth this quarter since the final three months of 2022, when the nation was nearing the end of debilitating COVID-19 lockdowns.
The weakness looked to be broad last month, when shipments to the EU climbed 1 percent, the slowest growth since February.
Even so, Chinese export prices have fallen every month but one since mid-2023 due to domestic deflation, compensating for the stronger currency and making shipments cheaper.
As a result, Chinese companies could continue to make inroads abroad during the trade war with the US.
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