China's economy faces uncertain recovery prospects as exports plummet

China's exports continued to decline in October, suggesting continued weakening external demand and increasing uncertainty about the economy 's recovery.

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China's total trade surplus in October stood at $56.5 billion, down significantly from $77.71 billion in September. (Source: Xinhua)

On November 7th, China's General Administration of Customs announced that exports fell for the sixth consecutive month in October, to $274.8 billion, a 6.4% decrease compared to the same period last year.

According to Chinese financial data provider Wind, this decline was an improvement over the 6.2% drop in September, which was lower than survey expectations. Meanwhile, imports rose 3% last month to $218.3 billion, exceeding Wind's expectations.

Beijing has announced a series of stimulus measures since the summer to revive flagging economic growth, but the overall recovery remains fragile, with asset write-offs continuing and local government debt posing a major risk to the economy.

Xu Tianchen, an economist at the prestigious British forecasting and consulting organization EIU, said: "The export data shows uncertainties regarding the recovery of external demand. The increase in imports may indicate a recovery in domestic demand, but the recovery will be moderate due to the weak exchange rate."

Soybean imports increased by 14.6% in the first 10 months of the year by volume compared to the same period last year, while crude oil imports increased by 14.4% and coal purchases increased by 66.8% during the same period.

The Canton Fair – a barometer of China’s export recovery – also failed to meet expectations, with deals failing to return to pre-pandemic levels as the fair concluded its latest session on November 4 in Guangdong province.

China's total trade surplus in October stood at $56.5 billion, down significantly from $77.71 billion in September.

“Export growth remains sluggish due to slowing economic growth in the U.S. and Europe. External demand is likely to weaken further over the next six months,” said Zhang Zhiwei, chairman and chief economist at Pinpoint Asset Management.

According to this expert, China is having to rely more on domestic demand to promote growth.

"The recovery in import growth was a positive surprise. It is unclear whether this recovery indicates that domestic demand has improved. We need to monitor other data points, such as retail sales. However, as fiscal policy becomes more proactive, domestic demand is likely to recover in the coming months," Zhang forecast.

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