China: Merchandise exports surge in December
Merchandise exports were up 18.1% annually in December (November: +21.1% year-on-year), markedly above market expectations. Surging exports in recent months have been driven by shipments of protective equipment and work-from-home electronics, which have both been in strong demand due to the pandemic. Meanwhile, imports were up 6.5% year-on-year (November: +4.5% yoy), indicative of solid domestic demand.
As a result, the merchandise trade balance rose from the previous month, recording a USD 78.2 billion surplus in December (November 2020: USD 75.4 billion surplus; December 2019: USD 47.3 billion surplus). Lastly, the trend improved, with the 12-month trailing merchandise trade balance recording a USD 538 billion surplus in December, compared to the USD 507 billion surplus in November.
Looking ahead, export growth is set to stay elevated in Q1, supported by a highly favorable base effect (given China was in the grips of the coronavirus outbreak in Q1 2020) and continuing high demand for pandemic-related goods. However, export growth should then moderate markedly later in the year. On the outlook for exports, analysts at Standard Chartered commented: “We are concerned that the recent strong export growth trend is not sustainable, as it is dominated by pandemic-related products. […] Furthermore, signs of both China’s share of global exports and global demand for electronics plateauing add to our concerns about the sustainability of China’s strong export growth. We believe these factors also explain why China’s policy makers have become increasingly wary of rapid Chinese yuan (CNY) appreciation recently.”