Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

China's trade boom hits speed bump as December imports growth slows sharply

Published 01/12/2018, 01:58 AM
Updated 01/12/2018, 02:00 AM
© Reuters. FILE PHOTO: Chinese national flags flutter near a steel factory in Wu'an

© Reuters. FILE PHOTO: Chinese national flags flutter near a steel factory in Wu'an

BEIJING (Reuters) - China's exports and imports growth slowed in December after surging in the previous month, adding to signs of ebbing economic momentum as the government extends a crackdown on financial risks and factory pollution.

A synchronized uptick in the global economy over the past year has been a boon to China and much of trade-dependent Asia, with Chinese exports in 2017 growing at their quickest pace in four years.

The sharp December imports slowdown, however, is raising concerns that the world's second-biggest economy faces domestic-demand pressure as authorities turn off cheap credit and restrict speculative financing.

"We have since long expected China’s domestic demand and imports to slow in 2018 on gradually tighter monetary and financial policies and slower real estate activity momentum", said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.

In December, exports rose 10.9 percent from a year earlier, beating analysts' forecast of a 9.1 percent increase, but cooling from a robust 12.3 percent gain in November, the General Administration of Customs said on Friday.

Imports grew at an even slower pace of 4.5 percent year-on-year last month, the weakest since they rose 3.1 percent in December 2016, and way below forecasts of 13.0 percent growth. They had boomed 17.7 percent in the previous month.

Despite the December slowdown, the overall picture for 2017 underscored strong global appetite for Chinese products ranging from electronics, household appliances and a vast array of consumer goods.

Exports from the Asian giant for the full year rose 7.9 percent, the fastest rate since 2013, while imports also gained a sizzling 15.9 percent - the best since 2011, thanks to insatiable Chinese demand for commodities.

SLOWING DOMESTIC DEMAND

But customs spokesman Huang Songping on Friday cautioned that strong growth in foreign trade would be difficult for China to maintain, adding that half of the growth rate in the value of imports last year was from higher prices.

The weaker imports in December backs recent data showing a slowdown in economic growth is underway, with domestic demand hit by the government's intensified war on polluting factories and a crackdown on debt risks.

Commodities imports were mixed, with copper purchases down 8.2 percent year-on-year by volume in December while coal and natural gas imports were up. Iron ore imports for the year hit a record high of 1.075 billion tonnes.

Economists estimated that China's import growth in December was entirely due to prices, with volumes down year-on-year.

Growth of China's imports of electronic and high-tech products year-on-year slowed to single digits from over 15 percent the previous month, customs data showed.

"We estimate that import volumes fell 6.8 percent in seasonally adjusted m/m terms last month...Although the trade data are often volatile, this latest decline – the largest in almost two years – is a sign that domestic demand may have weakened at the end of last year," Capital Economics Senior China Economist Julian Evans-Pritchard wrote in a note.

The import slowdown caused China's December trade surplus to surge to $54 billion, the highest since January 2016, compared to forecasts for a $37 billion surplus in December from November's $40.21 billion.

PROTECTIONISM RISK

On the monetary policy front, most analysts expect subdued inflation expectations to keep the People's Bank of China from tightening too hard.

Economists say rising trade friction is a key risk for China.

China's goods surplus with the United States, a sore spot in relations between the two nations, hit a record high of $275.81 billion last year - topping the previous record in 2015 of $260.8 billion. nB9N1OT022]

That came even as the overall surplus fell 17 percent to $422.5 billion, bringing the share of the U.S. portion of the surplus to 65 percent last year, up from 49 percent in 2016.

China's excess production capacity has emerged as a major trade irritant for the world's leading economic powers, prompting them to consider new steps to protect domestic industries and jobs from a flood of Chinese imports.

U.S. President Donald Trump's administration is also considering several unilateral tariff actions on steel, aluminum and China's intellectual property practices likely to draw disputes from WTO members.

"For 2018, we think solid global growth will likely provide some support for Chinese export growth," Nomura economists wrote in a note.

"However, later this year, we believe real effective exchange rate appreciation and an increase in U.S. protectionism could weigh on Chinese export growth, narrowing the trade surplus further."

© Reuters. FILE PHOTO: Chinese national flags flutter near a steel factory in Wu'an

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.