China Trade (Dec.) - Capital Economics
China Economics

China Trade (Dec.)

China Data Response
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Exports continued to do well last month, as renewed lockdowns abroad ensured the shift in consumption from services to goods persisted in many of China’s trading partners. Meanwhile, a pick-up in import growth suggests that domestic demand remains strong. We think trade will remain resilient in the near-term but will soften later this year.

Trade remains resilient amid lockdowns abroad

  • Exports continued to do well last month, as renewed lockdowns abroad ensured the shift in consumption from services to goods persisted in many of China’s trading partners. Meanwhile, a pick-up in import growth suggests that domestic demand remains strong. We think trade will remain resilient in the near-term but will soften later this year.
  • Export growth fell from a nearly three-year high in November of +21.1% y/y to +18.1% in US dollar terms (both the Bloomberg consensus and our forecast was +15.0%). In seasonally-adjusted terms, the level of export volumes continued to rise, though at a slower pace. (See Chart 1.) The big picture is that outbound shipments remain very strong thanks to the continued pandemic-induced boost to global demand for Chinese-made consumer goods such as electronics, furniture and recreational products. (See Chart 2.)
  • Import growth rose from +4.5% y/y in November to +6.5% in December in US dollar terms (Bloomberg +5.7%, CE +10.0%). That’s even as import prices remained lower than a year ago. We estimate that import volumes were up around 10% y/y last month, though they edged down slightly m/m in seasonally adjusted terms. (See Chart 1 again.) Inbound shipments of integrated circuit continued to pick up strongly given the strength in electronics exports. Meanwhile, imports of agricultural commodities slowed but remained strong, as the recovery in China’s pig stock following African Swine Fever continues to boost demand for soybeans. But inbound shipments of most industrial commodities dropped back as stockpiling slowed.
    (See Chart 3.)
  • Taken together, the trade surplus widened to $78bn. Adjusting for seasonality, it edged down slightly. But in both cases, the surplus remains at or near record levels. (See Chart 4.)
  • In the near-term, the tailwinds from last year’s stimulus should keep imports strong for a while longer. And although the export orders component of the manufacturing PMIs dropped back slightly in December, it still appears consistent with rapid export growth. But further ahead, the current strength of exports is unlikely to be sustained indefinitely, especially given that consumption patterns overseas should gradually return to normal as vaccines are rolled out. And imports are likely to drop back as policy support is gradually withdrawn throughout this year.

Chart 1: Goods Trade ($bn, seas. adj., 2004 prices)

Chart 2: Exports ($, 100 = Dec. 19, seas. adj.)

Sources: CEIC, Refinitiv, Capital Economics

Chart 3: Import Volumes (100 = Dec. 19, seas. adj.)

Chart 4: Trade surplus ($bn, seas. adj.)

Sources: CEIC, Refinitiv, Capital Economics


Julian Evans-Pritchard, Senior China Economist, julian.evans-pritchard@capitaleconomics.com
Sheana Yue, Assistant Economist, sheana.yue@capitaleconomics.com