China's exports and imports fall simultaneously for the first time since the start of covid-zero policy…
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“Exports lost -0.3% on an annual basis, down sharply from 5.7% in September, and imports fell -0.7% after rebounding 0.3% in the previous month. Weak supply and demand coincide in this downturn. On the one hand, global trends such as stifling inflation, rising interest rates and the generalised stagnation of the global economy.”
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Jaime Santirso
JAIME SANTIRSO
Correspondent in Beijing
08/11/2022
Updated at 13:09h.
There is no end in sight for the covid-zero policy that for more than two and a half years has kept China isolated from the world and subjected to the virus. In the meantime, the social discontent and economic costs are piling up, forming a mixture of uncertain evolution. Unlike the first ingredient, silenced as befits an authoritarian regime, the second is ponderable.
The Asian giant's exports and imports entered negative territory during the month of October, according to figures released yesterday by the customs authorities. This is the first simultaneous fall since May 2020, when the pandemic that emerged in Wuhan began to spread the disaster across the planet.
Exports lost -0.3% on an annual basis, down sharply from 5.7% in September, and imports fell -0.7% after rebounding 0.3% in the previous month. Weak supply and demand coincide in this downturn. On the one hand, global trends such as stifling inflation, rising interest rates and the generalised stagnation of the global economy.
On the other, the incessant restrictions at home, exemplified these days by the flight of workers from the Zhengzhou factory of Foxconn, Apple's supplier, in the face of a resurgence. As a result, the US company has already announced delays in deliveries of its iPhone 14. Not even the devaluation of the yuan, which makes operations cheaper, has balanced the circumstances for Chinese exporters. Partial shutdowns in Guangzhou, a manufacturing hub and home to 19 million people, could aggravate the situation.
"We expect exports to continue to decline over the coming quarters as the global economy enters recession," Capital Economics said in a report following the release of the customs data. "Import volumes declined again last month after falling significantly over the course of the year, and are likely to continue to do so in the face of the complex domestic backdrop.
Overseas remittances are the engine that keeps the ailing economy going, so their slowdown will add to the pressure. China's GDP grew by 3.9% year-on-year in the third quarter, which puts the partial figure for the year so far at 3%: well below previous years and the official target of "around 5%", which is already unattainable. The reality hidden by the government figures could turn out to be even more unfortunate. "If they resort to 3% to lie, things must be very bad," said a well-known academic during a private conversation.
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China's exports and imports fall simultaneously for the first time since the start of covid-zero policy prices.
In the short term, there is no prospect of the situation changing. Xi Jinping reiterated the validity of his covid-zero policy during the 20th Congress, before becoming the most powerful Chinese leader since Mao Zedong. Stock markets then reacted with huge losses to the personalist path of the world's second largest economy. A week later, last week, they jumped in the opposite direction on rumours that the authorities had begun to draw up a plan for the reopening. For the time being, the rumours were unfounded, as on Saturday the government maintained its strategy unchanged.
China is currently experiencing its highest number of cases in six months. The authorities today reported 7,475 infections in the last twenty-four hours, a modest figure in global terms but alarming in the context of China. And they are moving fast: the previous day it was 5,496. The country has not reached similar levels since 1 May, when Shanghai was under house-to-house confinement and Beijing was under almost complete restrictions. Several areas of the capital have already ordered the suspension of classes in schools.
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At the same time, public frustration is growing, spurred on by controversial cases such as the death of a three-year-old boy who did not make it to hospital in time because of the restrictions or a woman who jumped out of the window of her house in Hohhot after more than a month of quarantine. The end of the covid-zero policy, however, remains a mystery. As the trade balance shows, huge amounts of money depend on it. And a lot of other things as well.