China's trade surplus narrowed in December as exports underwhelm

GREG BAKER / AFP /Getty Images

Chinese trade data for December has largely underwhelmed, with the value of exports contracting sharply while growth in imports slowed.

According to China’s Customs Bureau, the value of exports fell by 6.1% year-on-year in USD-denominated terms, larger than the 3.5% contraction expected and a reversal from the 0.1% growth reported in the 12 months to November.

Import growth also slowed, increasing by 3.1% from December 2015, down on the 6.7% pace reported previously.

In volume terms, imports of iron ore came in at 88.95 million tonnes, down from 91.98 million tonnes in November, while those for crude oil rose to 36.38 million tonnes from 32.35 million tonnes, the highest monthly total on record.

Elsewhere coal imports fell fractionally, slipping to 26.84 million tonnes form 26.97 million tonnes. Copper exports, along with crude oil, was a standout performer, jumping to 490,000 tonnes from 380,000 tonnes previously.

Stockpiling ahead of Chinese New Year on January was cited as one factor behind the ongoing strength in commodity import volumes.

Over the year, China’s insatiable demand for raw materials remainder firmly in place with imports of crude oil, coal and iron ore surging by 13.6%, 25.2% and 7.5% respectively. Copper imports increased by a smaller 2.9%, although, at 4.95 million tonnes, they too hit the highest level on record.

Reflective of yuan weakness over the past year — it fell by over 6% against the US dollar — the value of exports in yuan-denominated terms increased by 0.6% while imports grew by a far larger 10.8%.

In US dollar-denominated terms, the value of exports and imports fell by 7.7% and 5.5% compared to the levels of a year earlier.

Largely reflecting the contraction reported in exports, the nation’s trade surplus shrunk to $US40.82 billion, down from $US44.61 billion in November and below the $US46.5 billion level expected.

It was the smallest surplus reported since April 2016.

Commenting on the trade report, Huang Songping, a spokesperson for China Customs, said that the nation’s trade situation continued to face difficulties, although he admitted that conditions improved in the final quarter of the year due to supportive policies and stronger demand from overseas.

He told reporters that it will be a challenge for trade conditions to improve in the year ahead, citing rising costs and less competitiveness in low end manufacturing sectors.

Huang also touched on the threat posed by Donald Trump’s proposed trade policies, noting that China would be the biggest loser in any anti-globalisation trend.

He said that Trump may add to protectionist measures, potentially limiting growth in Chinese export volumes.

During the US election campaign, Trump said he would slap a 45% tariff on Chinese imports entering the United States, pledging to label the nation as a currency manipulator during his first day in office.

With less than a week to go before Trump is sworn in as US president, Huang said that he hopes trade cooperation between the two nations will continue to develop.

The Customs Bureau said that China’s trade surplus with the United States narrowed to $US250.79 billion in 2016, down from $US260.91 billion a year earlier.

The trade report comes a week before China will release a swathe of important economic data, including Q4 GDP.

The reaction in financial markets to the trade report has been muted, with China sensitive assets such as commodities and the Australian dollar barely budging in the minutes following its release.

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