China’s move to further relax its Covid controls was made easier to understand by trade data for November showing a massive plunge in imports and exports in the worst performance for two and a half years.
China’s national health authority said on Wednesday that asymptomatic COVID-19 cases and those with mild symptoms can henceforth self-treat while in quarantine at home.
As well people will no longer need to show negative virus tests or health codes in order to travel between different parts of the country and that unless an area is designated as high-risk, work and local production cannot be stopped.
Wednesday’s measures also said that other than facilities such as retirement homes, elementary and middle schools and health clinics, venues should not require negative virus tests or health code checks.
All are moves designed to free up the economy and keep activity ticking over without disrupting jobs, output and more importantly, keeping a fractious populace happy after the series of protests and near riots in late November shocked the country and the west.
While some of the changes announced echoed similar easing moves made by other countries many months ago, the announcement was the strongest sign so far that China is preparing its people to live with the disease after nearly three years of crippling restrictions that have battered the economy.
The answer was in the trade report from the country’s Customs Administration which showed the extensive damage done to the country’s huge trade account by the restrictions.
China’s exports in November slumped 8.7% from a year earlier, while imports tumbled 10.6%. Both completely missed forecasts which were simply too optimistic.
Analysts in a Reuters poll had expected exports to shrink 3.5% after a 0.3% loss in October due to cooling global demand. Imports were forecast to have contracted by an even larger 6.0% from a 0.7% fall in October, with the Covid restrictions and a protracted property slump hitting domestic consumption by consumers and businesses.
China posted a trade surplus of $US69.84 billion in November, down from a forecast $US78.1 billion surplus in the poll and a $US85.15 billion surplus in October. It was the smallest surplus in seven months.
The fall in exports was almost across the board with shipments to the US down 25.43% for the fourth straight month of contraction.
Exports to the EU fell 10.62%, following a 9% drop in October. Exports also dropped to Japan (-5.6%), South Korea (-11.9%).
Meantime, exports to Russia grew 17.9% from a year earlier, slowing from October’s 34.6% in October. Exports also increased to the ASEAN countries (5.2%), which are now China’s biggest collective market.
Shipments to Australia rose 7.2% thanks to a surge in vehicle sales by the likes of Tesla, BYD, Great Wall.
Smartphone exports contracted 9.6% YoY in November. This could be a combined effect of supply disruption in China as well as weak demand in the US and Europe. But if we look further, it could be more an issue of weak demand.
The 10.6% slump in imports was the steepest fall since May 2020 (in the middle of the first wave of the pandemic and lockdowns), as domestic demand tumbled amid a resurgence of Covid cases and harsh restrictions.
Purchases of iron ore fell 5.9% year from 2021 but were up 4% from October while those of soybeans sank 14%.
But imports or oil, coal, LNG and copper rose as Chinese buyers took advantage of recent price falls).
Imports from the US were 7.3% lower while those from the EU dropped by 16.2%.
By contrast, purchases from Russia jumped 28.5% from a year earlier, maintaining double-digit growth since July as Russian imports from the EU fell because of western sanctions. The purchases were mostly coal, gas, oil and timber.
Imports from Taiwan contracted by 10.4% YoY in November. Parts and raw material imports into China for the production of electronic parts and electronic goods contracted. As we use semiconductors as an early indicator of growth, we believe that exports in the coming months should continue to contract.
