China's trade surplus surges in December amid weak imports

Both exports and imports from Asia's largest economy slowed much more rapidly than anticipated at the end of 2018, amid softer growth around the world and as the tariffs imposed by Washington took an increasing toll.

Nevertheless, according to the general Administration of Customs, China's foreign trade surplus jumped from $42.0bn November to $57.0bn in December (consensus: $52.bn), because the value of the nation's imports fell more quickly.

Measured in US dollar terms, the year-on-year rate of increase in China's exports slowed from 5.4% for November to a two-year low of -4.4% in December, falling short of the consensus for a reading of 2.0%.

Sales to the US were especially hard hit, falling by 3.8% versus a year ago after rising 9.8% during the previous month.

"This suggests that the drag from tariffs intensified in December, with the trade truce struck at the start of the month reducing the urgency among US firms to front-load their imports ahead of Trump’s previously threatened tariff hikes," said Julian Evans-Pritchard at Capital Economics.

"But tariffs can't take all of the blame – exports to the rest of the world also slowed, with surveys pointing to weaker global demand at the end of 2018."

Imports also slowed, with the rate of increase sliding from an annualised clip of 3.0% to -7.6%, which was also a two-year low (consensus: 4.5%).

And that was despite lat year's low base, chimed in Louis Kuijs at Oxford Economics.

According to Evans-Pritchard, that was partly the result of lower commodity prices, but the import volumes of major industrial commodities also declined.

That, he said "suggests that policy easing is still struggling to gain traction, with a continued slowdown in credit growth weighing on domestic demand."

For his part, Kuijs added: "Following the resumption of trade negotiations and some positive vibes after the January 7-9 talks in Beijing, we think it is likely that the US will again suspend the increase in tariffs after the expiration of the first 90 days moratorium in early March.

"We do not see the US fully removing the spectre of tariff hikes any time soon. But we think that it is now more likely than before that a deal emerges eventually that would mean a more lasting suspension of new tariffs."