Chinese trade surprises on the upside
A surprisingly robust rebound in December meant 2019 ended on a strong note for China’s international trade. Chinese exports grew by +7.6% year-over-year (y-o-y) in December, compared with -1.3% in November, while imports grew by +16.3% y-o-y (+0.8% in November). For 2019 as a whole, Chinese exports were almost flat compared to the previous year. While this represents a sharp decline from 10% growth in 2018, the avoidance of an outright contraction in exports is still a positive surprise in light of the elevated trade tensions with the US and notable deceleration in the global economy.
The improvement in Chinese exports was broad based in December, with the growth rate rising for all major destinations. Exports to the ASEAN economies (a group of Southeast Asian economies) led the expansion, reflecting the acceleration of supply-chain relocation outside China as well as the possible re-routing of some Chinese exports through ASEAN countries to circumvent additional US tariffs.
The strong rebound in exports could be partly due to seasonal factors related to the Lunar New Year (that falls on 25 January in 2020, nearly two weeks earlier than in 2019) and a low base-year effect. However, we believe it also reflects some real improvement in global demand, as some indicators outside of China are also showing signs of a recovery.
The surge in imports of some key industrial materials confirms that an industrial recovery is underway in China, as suggested by other indicators such as the rebound in manufacturing purchasing manager indexes and industrial production. The possible strengthening in global demand could add further momentum to the near-term recovery of the Chinese economy.