Beijing

China's exports and imports declined at their steepest pace in the last 18 months till November, as slow global and domestic demand, production disruptions due to Covid-related restrictions and real estate slump piled pressure on the world's second-biggest economy. 

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Exports contracted 8.7 per cent in November from a year earlier, a sharper fall from a 0.3 per cent loss in October and marked the worst performance since February 2020, official data showed on Wednesday. They were well below analysts' expectations of a 3.5 per cent decline.

The reports of declines coincided with the crucial decision by Beijing that rolled back strict Covid rules on Wednesday and allowed Covid cases with mild symptoms to quarantine at home.

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The outbound shipments have been losing steam since August as surging inflation, sweeping interest rate increases across many countries and the Ukraine crisis have pushed the global economy to the brink of recession.

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Exports are likely to shrink further over coming quarters, Julian Evans-Pritchard, senior China Economist at Capital Economics, said in a note.

"Outbound shipments will receive a limited boost from the easing of (China's) virus restrictions, which are no longer a major constraint on the ability of manufacturers to meet orders," he said.

"Of much greater consequence will be the downturn in global demand for Chinese goods due to the reversal in pandemic-era demand and the coming global recession."

Responding to the broadening pressure on China's economy, state media reported on Wednesday that a high-level meeting of the ruling Communist Party held on the previous day had emphasised the government's focus in 2023 will be on stabilising growth, promoting domestic demand and opening up to the outside world.

"The Politburo meeting held yesterday points to domestic demand as the major driver for growth for the next year, and the fiscal policy will remain proactive to support demand," said Hao Zhou, chief economist at Guotai Junan International.

Almost three years of pandemic controls have exacted a heavy economic toll and caused widespread frustration and fatigue in China.

The widespread COVID curbs hurt importers too. Inbound shipments were down sharply by 10.6 per cent from a 0.7 per cent drop in October, weaker than a forecast 6.0 per cent decline. The downturn was the worst since May 2020, partly also reflecting a high year-earlier base for comparison.

China's economy grew just 3 per cent in the first three quarters of this year, well below the annual target of around 5.5 per cent. Full-year growth is widely expected by analysts to be just over 3 per cent.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, cautioned about China's "bumpy reopening" process.

"As global demand weakens in 2023, China will have to rely more on domestic demand," Zhang told Reuters.

(With inputs from agencies)

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