Covid drags China to biggest drop in exports in three years

CHINA’S exports shrank sharply in December to their lowest level in three years as industrial activity slowed due to a surge in Covid infections.

Exports contracted by 9.9pc last month compared with the same time a year earlier, extending an 8.7pc drop in November.

Although the decline in exports was not as severe as economists’ estimate of an 11.1pc drop, it was still the worst fall since Wuhan was in the grip of the outbreak of the pandemic in February 2020.

It comes as China abandons its strict zero-covid restrictions to try to reopen the world’s second-largest economy.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, said: “The weak export growth highlights the importance of boosting domestic demand as the key driver for the economy in 2023.”

Covid has infected 90pc of the central Henan province since restrictions were eased, a health official announced this week, as the country experiences an unprecedented wave of infections.

On Christmas Day, China announced it will no longer publish daily figures for Covid cases and deaths.

Despite the sharp drop in shipments in the last few months, China’s total exports rose 7pc in 2022 thanks to its strong trade with south-east Asian nations. Still, growth was a far cry from a 29.6pc gain in 2021.

Meanwhile, a more modest decline in imports reinforced views that domestic demand in China will slowly recover in the coming months.

Imports fell 7.5pc last month, moderating from a 10.6pc decline in November and better than a forecast 9.8pc decline.

China’s 2022 trade surplus hit an all-time peak of $877.6bn (£721.1bn), the highest since records started in 1950, compared with $670.4bn in 2021.

Boosting domestic consumption will be vital to Beijing’s economic recovery plans, and there is lots of lost ground to recover – imports rose only 1.1pc last year, down sharply from 30pc growth in 2021.

China’s purchases of coal and copper shrank in December, as industrial activity slowed due to the surge in Covid infections.

Meanwhile, measures to ease a crippling funding crunch in the property sector could revive home sales and boost imports of industrial materials from iron ore to copper.