China's Trade Surges with Unexpected Growth in December

An aerial view of a container ship leaving the dockyard in Qingdao in east China's Shandong province.

China's trade data for December has surprised many by showing strong growth, with exports and imports both exceeding expectations.

According to the customs authority, exports in December rose by 10.7% compared to the same month last year, significantly surpassing the projected growth of 7.3% from a Reuters poll. This follows a 6.7% growth in November and a notable 12.7% increase in October.

At the same time, imports also showed positive movement, climbing 1.0% from the previous year. This recovery comes after two consecutive months of decline, and analysts had predicted a drop of 1.5%. In comparison, imports had decreased by 3.9% in November and 2.3% in October.

For the entirety of last year, China's yuan-denominated total exports grew by 7.1%, a significant increase from a mere 0.6% growth in 2023. Similarly, imports saw a rise of 2.3%, bouncing back from a slight decline of 0.3% in 2023.

Economists note that the improved trade figures may contribute positively to China’s economic growth, with GDP data set to be released later this week. Zichun Huang, an economist at Capital Economics, believes that the current government stimulus measures, particularly increased fiscal spending focused on investment, are likely to stimulate construction and boost demand for industrial commodities in the upcoming months.

Despite these encouraging export numbers, worries persist regarding the domestic economy, particularly due to an ongoing real estate crisis that has affected local demand. This situation has led China to rely more heavily on its exports to fuel economic growth. Economists anticipate that trade will continue to play a crucial role in supporting China's economy as these figures are unveiled.

Amid heightened tensions with major trading partners like the U.S. and the European Union, exports have remained a bright spot in an otherwise challenging economic landscape. However, concerns are growing about the potential implications of U.S. President-elect Donald Trump's administration, particularly with his threats of imposing higher tariffs on Chinese goods.

In 2023, exports of electric vehicles and semiconductors saw considerable growth, increasing by 13.1% and 18.7%, respectively. This growth reflects the changing dynamics of China’s export market.

Looming Concerns

As the inauguration of President-elect Trump approaches, fears about further tariffs on Chinese products are intensifying. He has suggested an additional 10% tariff on all goods imported from China.

In response to the slowing economy and rising social tensions, Chinese authorities have ramped up policy support, including lowering interest rates, loosening property purchase restrictions, and injecting liquidity into the financial markets. However, experts suggest that caution is still necessary, as indicated by Gabriel Wildau from Teneo, who warns that while leaders are aware of the need for stimulus, there remains hesitation to enact sweeping measures that might lead to deflation.

China’s leadership has indicated a priority on boosting domestic consumption this year and expanding fiscal programs aimed at encouraging consumers to trade in old goods for new ones. This trade-in program, introduced in July, offers subsidies to consumers who swap their old cars or appliances for new models at discounted rates.

With the full-year GDP and other critical economic statistics set to be released on Friday, analysts project a 5.1% growth rate for the final quarter of 2024, as per a Reuters poll.

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China, Economy, Trade