China's exports, imports tumble

Both exports and imports plunged in China last month, official data showed on Friday, as Covid tore through the economy and global demand weakened.

Exports contracted by 9.9% in December year-on-year, following an 8.7% fall in November. December’s decline was the worst since February 2020, although it was ahead of forecasts for a 11.1% slide.

Imports fell 7.5%, although that was a marginal improvement on November’s 10.6% decline and better than forecasts for a 9.8% drop.

The trade surplus widened to $78bn in November from $69.3bn a month earlier. The surplus for 2022 now stands at an all-time high of $877.6bn, compared to $670.4bn in 2021 and the highest since records started in 1950.

For most of 2022, Beijing had been following a policy of zero-Covid, including stringent rolling lockdowns and mandatory testing. But following unprecedented public protests at the end of year, the authorities abruptly abandoned the policy last month and Covid infections have since surged.

Michael Hewson, chief market analyst at CMC Markets, said: "China’s trade numbers merely serve to showcase the damage done by the various restrictions, lockdowns and the relaxation.

"The decision to let the virus rip through a largely unvaccinated population is likely to have consequences over the next few months, which could act as a brake on first quarter economic activity.

"While the numbers were slightly better than expected, and will improve in January, they still point to an economy that is experiencing significant economic disruption as a result of the virus."

Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics, said: "Both exports and imports plunged amid an onslaught of Covid cases, disrupting foreign trade activity. The Covid storm is temporarily hurting import demand and, to a degree, disrupting production and factory-to-port transportation of exports.

"Meanwhile, export demand is weak as households in China’s major markets curb spending on consumer goods, in the face of high inflation, higher rates and generally poor economic prospects."

Exports fell fastest to the European Union and the US among China’s major markets, down 17.5% and 19.5% respectively. Exports to the Association of South East Nations rose by 7.5%.

Wrigley added: "The imminent Chinese New Year holiday period will delay the economic rebound. But green shoots are sprouting and consumers have built up savings during the pandemic. Domestic demand recovery is likely to start in March, building momentum from the second quarter onwards."