Key Highlights
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China’s exports fell 9.9% in December 2023 compared to a year earlier, the first decline since January 2016. This was largely driven by weakening global demand.
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Imports also shrank 7.5% in December, indicating soft domestic demand.
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For the full year of 2023, exports rose 4% while imports edged up just 0.2%. Both figures marked a significant slowdown from 2022.
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The trade surplus widened to a record $878 billion in 2023 from $876 billion in 2022. This was helped by curbs on imports like coal and liquid natural gas.
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Analysts say external uncertainties, high inflation that eats into demand, dissipating base effects, and production disruptions due to COVID-19 have all weighed on China’s foreign trade.
Plunging Exports Signal Headwinds for Economy
China’s exports dropped for the first time in over two years in December 2023, underscoring cooling global demand that points to more trouble ahead for the world’s second-largest economy.
Exports tumbled 9.9% last month from a year earlier to $237.2 billion, according to data from China’s customs agency, marking the first yearly decline since January 2016. The fall was steeper than economists’ median forecast for a decline of 8%.
Meanwhile, imports fell 7.5% compared to forecasts for a 7% drop, indicating sluggish domestic consumption. China’s trade surplus expanded to a record $876.4 billion last year.
The dismal December trade figures come after exports and imports grew at their slowest pace for any full year since 2020. For 2023 as a whole, exports rose 4% while imports edged up 0.2%.
Year-on-Year Change (%)
Exports Imports Trade Balance
Dec 2023 -9.9% -7.5% $76.2 billion
2023 +4% +0.2% $878 billion
2022 +7% +1.1% $876 billion
The numbers highlight loss of momentum in the world’s biggest trading economy that could drag on global growth. Cooling overseas shipments also point to easing pressure on global supply chains.
Multiple Headwinds Batter China’s Foreign Trade
Economists said exports likely dropped across the board – from electronics to textiles and plastics – due to evaporating overseas demand as high inflation and interest rate hikes take their toll on Western consumers.
The year-end pullback in shipments came as stimulus measures in major economies started to fade while the war in Ukraine and euro zone downturn dragged on.
At home, China’s rigid COVID curbs for most of 2022 and a property market downturn have also hurt its exporters. The government’s zero-COVID policy disrupted output and demand before it abruptly ended restrictions last month.
“The worst is yet to come,” said Zichun Huang, economist at Capital Economics. “We expect exports to fall by 15% in 2023 as the global economy heads towards a recession.”
The World Bank and IMF have both forecasted slower global GDP growth in 2023. Major central banks remain hawkish while geopolitical tensions continue to simmer. Hence, overseas appetite for Chinese goods could remain depressed this year.
On the other hand, the lowering of COVID barriers is expected to gradually restore production and consumer demand. But businesses still face uncertainties due to surging virus cases that have overwhelmed the healthcare system.
Import Weakness Signals Domestic Woes
The decline in December imports points to China’s feeble domestic activity despite some recovery in recent months as virus restrictions were removed.
Imports of soybeans, iron ore, coal and other commodities shrank while purchases of integrated circuits also slid.
For 2023, imports of coal, crude oil, natural gas and agricultural products fell from a year earlier, though imports of integrated circuits expanded 10.3%.
Breakdown of Key Imports (Year-on-Year % Change)
Coal Crude Oil Nat.Gas ICs Grains
Dec 2023 -7.3% -5.6% -9.0% -14.6% -7.3%
2023 -6.7% -1.3% -9.4% +10.3% -7.7%
These trends reflected softer industrial activity and infrastructure building as the economy slowed under the weight of repeated lockdowns and property distress.
Consumer demand likely remained depressed amid job insecurity and income pressures. Retail sales have dropped for several months as the country grappled with repeated COVID waves.
“Domestic demand didn’t fully recover from the COVID shock. It will likely be a bumpy recovery this year,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
Outlook Remains Gloomy with Recession Risks
The steep drop in December shipments shows exports were yet to benefit from China’s abrupt reopening in early December. The chaotic way restrictions ended also constrained activity in the short term.
Analysts expect the trade sector could stabilize by the middle of 2023.
“Exports should start to recover later in Q1 or Q2 as supply disruptions ease, global demand recovers somewhat, and production resumes post-COVID,” said Louis Kuijs, Asia economist at S&P Global Ratings.
However, slowing global growth, stubborn inflation and the property crisis will continue dragging on China’s economy. GDP grew just 3% in 2022 – among the weakest rates in decades.
If global demand continues worsening, that would mean less appetite for Chinese goods, larger trade surpluses and a shrinking current account. These trends don’t bode well for China’s fragile recovery.
“The big picture is China’s economy faces strong headwinds this year. There are even risks of recession unless we see significant policy stimulus,” said Wang Tao, chief China economist at UBS.
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