China‘s exports and imports unexpectedly contracted in October, the first simultaneous slump since May 2020, as surging inflation and rising interest rates hammered global demand while new COVID-19 curbs at home disrupted output and consumption.

Outbound shipments in October shrank 0.3% from a year earlier, a sharp turnaround from a 5.7% gain in September, official data showed on Monday, and well below analysts’ expectations for a 4.3% increase. It was the worst performance since May 2020.

The weak October trade figures highlight the challenge for policymakers in China as exports had been one of the few bright spots for the struggling economy.

It heaps more pressure on the country’s manufacturing sector and threatens any meaningful economic revival in the face of persistent COVID-19 curbs, protracted property weakness and global recession risks.

Chinese exporters weren’t even able to capitalise on a further weakening in the yuan currency and the key year-end shopping season, underlining the broadening strains for consumers and businesses worldwide.

Tepid domestic demand, weighed down by fresh COVID curbs and lockdowns in October as well as the cooling property market, hurt imports too.

Inbound shipments declined 0.7% from a 0.3% gain in September, below a forecast 0.1% increase – the weakest outcome since August 2020.

The data reflected a recent official factory activity survey which showed a sub-index for imports extended declines last month.

The overall trade figures resulted in a slightly wider trade surplus of $85.15 billion, compared with $84.74 billion in September, missing a forecast of $95.95 billion.

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