First, global trade demand further declined. the value of China’s exports fell by 0.4% year-on-year in October, ending 28 months of positive growth since June 2020. On the surface, export growth in October was below market expectations of 4.5%. In fact, the three major Asian export-oriented economies we track – South Korea, Taiwan and Vietnam – also saw their combined export value decline by 0.3% in October, ending a 25-month streak of positive growth. The growth rate is also largely seasonal. Of course, subsequent Chinese exports may continue to show alpha attributes, but from the short-term data in October, the overall downward global trade environment dominated.
Second, emerging market demand is better than developed economies. Historically, in the global economy from the upward to the downward switch period, the monetary tightening effect spillover from the developed economies, often causing greater impact on emerging market economies. At the same time, because emerging market countries are more dependent on commodity exports, they are more sensitive to the decline in global trade and commodity prices. But from the current round, emerging market economies have shown greater resilience, with China’s exports to the U.S. and EU falling 12.6% and 9.0% year-on-year respectively in October, but exports to ASEAN, Russia, India and Brazil still maintaining positive growth. This is because, on the one hand, emerging market economies did not carry out super large-scale monetary and fiscal stimulus after the epidemic, and the current round of inflationary pressure is more manageable; on the other hand, the current commodity prices remain at relatively high levels, and emerging markets continue to benefit from this.
Third, China’s domestic demand showed signs of stabilization, with the value of Chinese imports falling 0.7% year-on-year in October, ending the previous 25 months of positive growth. However, taking into account changes in the import price index, the year-on-year decline in import volumes since March has narrowed month-on-month, with the year-on-year decline in the import volume index published by Customs narrowing from 13.1% in March to 2.8% in September. Imports of major commodities have risen from the bottom range in recent years in the first half of the year to the high range in recent years, with imports of crude oil, iron ore and coal and lignite all recording positive year-on-year growth in October.
Looking forward, the process of interest rate hikes in major overseas economies is still not over, and the external demand environment facing China remains severe and complex. However, with the support of multiple domestic policies, domestic demand has shown a stabilizing recovery momentum, which is expected to hedge against the downward spiral of external demand.
