China exports and imports tumble sharply in December, cloud 2023 growth outlook

BEIJING – China’s exports shrank sharply in December as

global demand cooled,

while imports tumbled again as surging Covid-19 infections and a property downturn weighed heavily on domestic demand, highlighting risks to the country’s economic recovery this year.

Exports had been one of the few bright spots in the world’s second-largest economy during the pandemic, but deteriorated rapidly since October 2022 as consumers overseas slashed spending in response to central banks’ aggressive rate hikes to tame inflation.

This weakness is expected to continue well into the new year as the

global economy teeters on the brink of recession,

but China’s imports are expected to slowly recover in the coming months after the government’s abrupt dismantling of zero-Covid measures in December paved the way for the economy to reopen, releasing pent-up demand.

“The outlook for exports remains weak, given the combination of slowing global growth and an ongoing consumer shift from goods towards services,” said Oxford Economics senior economist Lloyd Chan.

“Moreover, United States export controls on semiconductor-related equipment will be a key drag.”

Exports contracted 9.9 per cent year on year in December, extending an 8.7 per cent loss in November, slightly beating expectations for a 10 per cent fall, Customs data showed on Friday. The drop was the worst since February 2020.

Imports fell 7.5 per cent last month compared with a 10.6 per cent decline in November, better than a forecast 9.8 per cent decline.

Despite the sharp fall-off in shipments in the last few months, total exports rose 7 per cent in 2022, thanks to China’s strong trade with South-east Asian nations as well as an export boom of new energy vehicles. Still, growth was a far cry from the 29.6 per cent gain in 2021.

Imports rose only 1.1 per cent last year, down sharply from a 30 per cent growth in 2021.

China’s Commerce Ministry said on Thursday that slowing external demand and the rising risks of a global recession are posing the biggest pressures to the country’s trade stabilisation, leaving “arduous tasks”.

An official factory activity survey showed that a sub-index of new export orders has remained in contraction territory for 20 consecutive months. But the ministry said major exporting provinces have reported seeing some improvement in getting new orders.

After three years, the Chinese authorities have finally removed anti-virus curbs that disrupted port logistics and shut down factories in key manufacturing hubs.

China posted a trade surplus of US$78 billion (S$103.2 billion) for December, compared with a US$69.84 billion surplus in November.

Policymakers have pledged to increase support for the economy as they are eager to underpin growth and ease disruptions caused by the sudden end to Covid-19 curbs.

Measures to ease a severe funding crunch in the property sector, in particular, could boost imports of industrial materials from iron ore to copper.

Analysts polled by Reuters expect China’s economic growth to rebound to 4.9 per cent in 2023, before steadying in 2024.

The economy likely grew just 2.8 per cent in 2022 as lockdowns weighed on activity and confidence, well below the official target of around 5.5 per cent. Fourth-quarter and 2022 gross domestic product data will be released on Jan 17.

ING chief China economist Iris Pang said both exports and imports could continue to contract in the first half of 2023 from a year earlier, but added that trade could recover towards the second half when domestic and external economies are expected to improve. REUTERS