China Trade Data Worse than Expected, Bad News for Economy

The export and import figures of China were much worse than expected in December, underscoring the rapid weakening of the Chinese economy. Monday’s figures suggest the negative impact of the trade war may be greater than Chinese authorities previously estimated, and point to the need for a more rapid and larger economic stimulus to stabilise growth.

Total exports fell to US$221.25 billion in December, down 1.4 per cent from November, and 4.4 per cent from the same month in 2017, according to data from China’s General Administration of Customs.

The December drop – the biggest since December 2016, when China grew at its slowest pace since 1990 – was unexpected, with analysts forecasting a 2 per cent rise, according to a Bloomberg survey.

The December figures give the first indication of the full impact of the US-China trade war. Exports in previous months were supported by “front loading” of orders by Chinese producers to beat the planned rise in US tariffs to 25 per cent, scheduled to go into effect on January 1 before Chinese President Xi Jinping and his US counterpart Donald Trump agreed to a 90-day tariff ceasefire in their meeting on December 1.

Total imports fell to US$164.19 billion, a fall of 10 per cent from last month and down 7.6 per cent a year earlier. Analysts had expected a 4.5 per cent rise, according to the Bloomberg survey. The December drop was the biggest since July 2016.

The drop in imports is another bad sign for the Chinese economic outlook, indicating a rapid weakening of Chinese domestic demand. China’s total trade surplus rose US$57.06 billion, above the Bloomberg survey estimate of US$51.6 billion.

China has been reporting strong export performance since Washington started to levy its first round of tariffs on Chinese imports in early July, over allegations of Beijing’s unfair trade practices, forced technology transfer and intellectual property theft.

China has denied the accusations, hitting back with tariffs on billions worth of US goods. The Chinese government will reportedly set a growth target this year of 6 to 6.5 per cent, down from the “about 6.5 per cent” target for last year, due to the effects of the trade war and the government’s campaign to cut debt and risky lending.

Most private economists are predicting growth at the low end of that range, though they warn that a failure to resolve the trade conflict could push growth below 6 per cent if the US follows through with its threat to raise tariffs further.