China: Merchandise exports increase in December
Merchandise exports climbed 2.3% in annual terms in December (November: +0.5% year-on-year). December’s figure marked the fastest outturn since April 2023 and beat market expectations. That said, a low base of comparison flattered the figure: exports saw a double-digit contraction in December 2022 due to disruption stemming from the abrupt lifting of Covid-19 restrictions. Moreover, China’s export recovery is lagging behind that seen in other East Asian economies such as Korea and Taiwan. Meanwhile, merchandise imports were broadly stable, rising just 0.2% on an annual basis in December (November: -0.6% yoy), in a sign of soft domestic demand.
As a result, the merchandise trade balance improved from the previous month, recording a USD 75.3 billion surplus in December (November 2023: USD 68.4 billion surplus; December 2022: USD 69.0 billion surplus). Lastly, the trend pointed up, with the 12-month trailing merchandise trade balance recording a USD 823.5 billion surplus in December, compared to the USD 817.1 billion surplus in November.
Looking to 2024, while China’s merchandise exports are forecast to return to growth, the expansion is set to be the slowest in East and South Asia. Persistent trade tensions with the West will constrain exports and encourage firms to continue to pivot manufacturing away from China.
On export constraints, Nomura analysts said:
“In addition to a global slowdown, we see two more headwinds for exports. First, a surge of EV, battery and solar panel exports from China could trigger an increase in trade frictions. In September, the European Union formally launched anti-subsidy investigations into China’s electric vehicle industry in an attempt to protect its manufacturers, which was followed by the latest retaliatory measures from China, with investigations into French brandy imports. Another potential barrier is the higher base for exports to Russia. As Chinese companies establish themselves within Russian markets, this elevated pace is unlikely to sustain through 2024.”