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China’s trade has contracted

Exports shrank 8.7 percent year-on-year in November, a sharper drop than the 0.3 percent loss in October, showing the worst performance since February 2020.

China’s exports and imports contracted much faster than expected in November due to weak global and local demand, production cuts due to COVID and a decline in the real estate sector. Exports shrank 8.7 percent year-on-year in November, a sharper drop than the 0.3 percent loss in October, the worst performance since February 2020, according to official data released Wednesday. 

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The data underlined the negative impact of the new COVID restrictions in several Chinese cities, including manufacturing hubs Zhengzhou and Guangzhou.

Apple supplier Foxconn said revenue fell 11.4 percent year-on-year in November due to production problems caused by restrictions at the world’s largest iPhone factory in Zhengzhou.

Trade surplus decreased

According to the Shanghai Mercantile Exchange, the index of freight rates from Chinese ports to Europe and the west coast of the USA fell by 21.2 percent and 21.0 percent, respectively, in November compared to October, revealing the declining export trend due to weak foreign demand conditions.

 

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This resulted in a lower trade surplus of $69.84 billion compared to October’s surplus of $85.15 billion. The figure was the lowest since April, when Shanghai was under lockdown. 

Have to rely more on domestic demand

The government has responded to weakening economic growth by implementing a number of policy measures in recent months, including reducing the amount of cash banks must hold as reserves and providing financing to bail out the real estate sector.

However, analysts doubt that the steps will yield quick results unless the restrictions are announced to be lifted.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, warned of China’s “bumpy reopening” in an interview with Reuters. “As global demand weakens in 2023, China will have to rely more on domestic demand,” he said.

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