China's imports, exports shrink in October as demand from U.S. plummets

Nov. 7 (UPI) -- China's imports and exports shrank unexpectedly in October and failed to reach growth expectations as goods shipped to the United States plummeted for a third straight month.

A key economic report card released Monday by China's national customs authority showed the country's overall exports fell by 0.3% in October compared to a year ago, but analysts had been expecting an increase well above 4%.

In a more troubling sign, exports to the United States, Beijing's largest trading partner, fell by 12.6% over the same month -- which was the third dip since August.

October's decline in exports represented an even deeper nosedive from a 5.7% annual increase that was seen in September and was the first market retraction in more than two years, according to financial data analyst Refinitiv Eikon.

China's imports also ran into trouble in October, falling 0.7% and missing expectations for 0.1% growth following a 0.3% increase the previous month.

Meanwhile, the country's overall exports to the European Union also declined by 9% in October after tracking upward the month before. But China also increased its exports to regional trading partners by 20%.

The sudden downturn coincides with widespread "zero-COVID" government policies that have been tightened across the country in recent weeks due to a sudden wave of outbreaks, hammering consumer spending.

China's economy grew faster than expected over the September quarter but was well short of the official target as the country struggled with the COVID-19 pandemic and efforts to contain the virus.

China's economy grew by 3.9% from July to September, beating the International Monetary Fund prediction of 3.2% growth for that period, according to its National Bureau of Statistics.

Still, some of China's most lucrative industries were said to be feeling the pinch in the current economic environment. Exports of toys and popular brand-name household appliances each fell by about 20%, while footwear also declined 11%.

The economy was still showing other signs of strength, however, with vehicle exports surging by 60% in October, according to the data. Also, the country's energy sector was mostly booming, with crude oil imports up by 14% over last year and coal imports on the rise by 8%. However, natural gas imports fell by almost 19%.

Economic analysts at Barclays, anticipating a continuing fall in demand from the United States and EU, cut growth forecasts for China in 2023 on the prospect that exports could fall by 2% or more because of ongoing inflation and supply-chain issues.

"High inflation erodes the purchasing power of consumers overseas," said a statement from Hao Zhou, the chief economist at Guotai Junan International, one of China's largest investment banks. "As monetary policy will go deeper into restrictive territory, the risk of economic recession overseas will rise, considerably weighing on global demand. Thus, China's exports may come under pressure."

Chinese President Xi Jinping, who was installed for a historic third term in September, has also come under increased pressure due to the strict "zero-COVID" policies that continue to disrupt the normal flow of business for sometimes months.