Against the backdrop of a significant increase in global interest rates and the drag on the world economy from wars in Ukraine and the Middle East, China's exports have declined for the sixth consecutive month, increasing the pressure on the Chinese government to increase domestic spending.
These data further indicate that China's economic growth is still facing difficulties after its recent rebound. Although Chinese officials have expanded stimulus measures in recent weeks, manifested by an increase in imports, economists say that at a time when the long-term downturn in real estate is squeezing investment and consumer spending, the Chinese government needs to take more measures in the last few months of this year to prevent another slowdown in the economy.
The General Administration of Customs of China announced on Tuesday that China's export volume fell to $275 billion in October, a year-on-year decrease of 6.4%, greater than the 6.2% decline in September.
The decline in exports in October was also greater than the 3.5% expected by economists surveyed by The Wall Street Journal.
The decline in exports indicates that global demand for Chinese goods is being suppressed as both consumers and businesses are responding to slower growth and rising borrowing costs. Other Asian export oriented economies such as South Korea and Taiwan have also reported weak export data for several consecutive months.
The International Monetary Fund (IMF) predicts that global economic growth will slow down this year and next as the impact of significant interest rate hikes by central banks gradually becomes apparent. Most economists currently expect the United States to barely avoid a recession, but expect economic growth to slow in the coming months.
For China, weak exports mean that it will need to rely on domestic sources of growth to sustain economic development this year and even 2024.
Achieving this has always been a challenge. In the real estate industry, where many Chinese people invest their personal wealth, real estate investment is shrinking as the government seeks to combat excessive speculation. This, in turn, has dealt a heavy blow to consumption, as families who have been plagued by the epidemic continue to control their spending and try to ride out the downturn in the real estate market smoothly.
China's economic growth slowed to an extremely low level in the second quarter compared to the previous month, but stimulus measures such as easing restrictions on home purchases and lowering interest rates helped the Chinese economy rebound slightly in the third quarter. In the first nine months of this year, China's economy grew by 5.2%, and is expected to achieve the government's conservative target of around 5% annual growth. The IMF stated on Tuesday that it expects China's economic growth rate to be 5.4% this year, higher than the previous forecast of 5%, citing recent policy measures and better than expected growth in the third quarter.
However, recent business surveys have shown a decrease in factory orders and a slowdown in construction and service industry activity, indicating that the economy is still struggling. The Chinese government has recently increased its stimulus measures, adding billions of dollars of special bonds for infrastructure projects, including for the recovery and reconstruction of affected areas during summer floods.
In October, imports increased by 3%, ending a seven month consecutive decline. Economists say this indicates that the Chinese government's stimulus measures are beginning to translate into healthier household and business spending, but they also warn that the government needs to continue implementing stimulus measures.
HSBC economist Erin Xin said that although trade data shows an improvement in domestic demand, policymakers still need to continue supporting economic growth.
Many economists expect more interest rate cuts and more government spending to come. Some people advocate reducing taxes or providing other direct financial assistance to households to stimulate consumer spending growth, but the Chinese government has so far shown little enthusiasm for such policies and believes that they will not bring lasting benefits.
Capital Economics economists said in a research report that with the improvement of China's domestic economy, imports are expected to slow down in the coming months. They stated that the downward trend in exports may continue until around the middle of next year.