China posts record trade surplus in 2021, but could face headwinds this year

China's high growth numbers last year reflect in part the global recovery and the surge in global demand. PHOTO: REUTERS

BEIJING - China posted a record trade surplus last year, but there are signs of a possible economic slowdown ahead, with growth of exports and imports softening in December.

Trade surplus in December last year came in at US$94.46 billion (S$127 billion), up from US$71.72 billion in November, according to data released on Friday (Jan 14) by Chinese Customs.

This pushed the annual trade surplus to US$676.43 billion - the highest since records started in 1950 - up from US$523.99 billion in 2020.

Exports in 2021 grew to US$3.36 trillion, 29.9 per cent higher than the year before. Imports rose by 30.1 per cent compared to 2020, reaching US$2.69 trillion.

Last month, exports logged year-on-year growth of 20.9 per cent, lower than the 22 per cent growth in November. This was still above expectations for a 20 per cent increase forecasted by analysts in a Bloomberg survey.

On the other hand, imports in December grew by 19.5 per cent year-on-year, much lower than the 31.7 per cent growth in November, and also below the expected 27.8 per cent forecasted by analysts.

China's high growth numbers last year reflect in part the global recovery and the surge in global demand, as major economies reopened after pandemic restrictions, which caused a slowdown in 2020.

But General Administration of Customs spokesman Li Kuiwen said China's trade this year would face increasing uncertainty, instability and imbalance.

"China's economic development is facing threefold pressures of contraction of demand, supply shock and weakening expectations," he said at a press briefing on Friday.

"The global epidemic situation is still severe, the external environment has become more complex and uncertain, and the recovery momentum of international demand has slowed down," he said.

Foreign trade in 2022 would also have to deal with the pressure of coming off a high base in 2021, he added.

Mr Julian Evans-Pritchard, senior China economist at Capital Economics, said there was limited scope for a rise in export volumes this year "given that ports are already stretched to capacity". He noted that there could be risks of congestion and delays because of Covid-19, with recent cases in port cities such as Dalian and Shanghai.

"Further ahead, the bigger problem for exports is that foreign demand is likely to drop back as shifts in global consumption patterns due to the pandemic unwind and backlogs of orders are gradually cleared," said Mr Evans-Pritchard in a note.

"The PMI export orders indices - which measure the share of firms seeing rising orders - have remained under 50 throughout the second half of 2021. This suggests that, outside a few narrow product categories where demand is being temporarily buoyed by the pandemic, foreign demand for Chinese exports is already coming off the boil."

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