China reports surge in exports ahead of crucial trade deal

The figures, released a day before Beijing and Washington are expected to sign a much-anticipated phase 1 trade deal, showed that exports jumped 7.6% year-on-year in December, compared to a -1.3% decline in November. The consensus had been for growth of around 3%.

Imports surged 16.3%, from marginally revised growth of 0.8% in November. That was also well above consensus, for around 9.6%.

The unadjusted trade surplus rose to $46.79bn, from $37.93bn a month earlier. Economists had pencilled in around $46bn.

China’s extraordinary economic growth, fuelled in large part by an historic surge in consumer spending as well as heavy investment in infrastructure, has slowed in recent years and currently sits near 30-year low. The trade war between Washington and Beijing, which has seen both countries impose tariffs on billions of dollars of imports, has also weighed heavily.

For the whole of 2019, total exports rose by just 0.5%, compared to 10% in 2018, a three-year low. Imports fell -2.8%, compared to a rise of 15.8% a year earlier. The December 2019 figures also benefited from comparisons to a weak performance in December 2018.

In note, Rabobank economists argued: “Since these data are quite volatile, we would need another month of data to establish whether there was a reversal in trade flows. But for the optimists, these Chinese trade numbers could be seen as the first hard evidence of a thaw in global trade.”

TD Securities noted: “China’s December trade report came in firmer than expected. Further gains in exports and imports are likely to be more gradual, especially given the still tentative recovery in manufacturing globally. Also, data in the next couple of months will likely be distorted by Chinese new year holidays.”

Freya Beamish, chief Asia economist at Pantheon Macroeconomics, said: “The bulk of the strength seems to have come from tech goods, while mechanical and electrical products were particularly strong. Imports of iron ore also surged.

“Price data are not yet available, but even after accounting for price moves, the gain in volume terms for both exports and imports likely was strong.

“Imports strongly outperformed exports in the fourth quarter in real terms. The drag from net exports on quarterly real GDP growth, therefore, looks to have deepened sharply, from an already nasty 0.3 percentage points in the third quarter.”

Representatives from the US and China spent the end of 2019 negotiating the so-called phase 1 trade deal, as they sought to halt the damaging trade war between the two countries, which has also depressed the global economy. Once signed, the focus will switch to a far more complex phase 2 deal, which observers predict will be far harder to agree.