Caixin
Jan 12, 2018 07:26 PM
ECONOMY

2017 China Exports, Imports Up for First Time in Three Years

In December, China’s exports jumped 10.9% from a year ago to $231.8 billion, down from a 12.3% pace in the previous month. Imports grew 4.5% year-on-year in the month to $177.1 billion, slowing from a rise of 17.7% in November and the lowest reading in a year. Photo: Visual China
In December, China’s exports jumped 10.9% from a year ago to $231.8 billion, down from a 12.3% pace in the previous month. Imports grew 4.5% year-on-year in the month to $177.1 billion, slowing from a rise of 17.7% in November and the lowest reading in a year. Photo: Visual China

China’s exports and imports both increased for the first time in three years in 2017, official figures showed Friday, but trade tensions with the U.S. and cooling domestic demand are clouding prospects this year.

Exports — a key driver of China’s economic expansion in 2017 — rose 7.9% to $2.26 trillion, the highest rate since 2011, according to data released by the General Administration of Customs. Imports soared 15.9% to $1.84 trillion, the strongest increase in six years.

China's exports and imports both contracted for two consecutive years before 2017.

But import growth will likely lose momentum this year on weakening domestic demand, as continued government efforts to deleverage the financial sector and curb opaque borrowing by local authorities are set to slow investment in infrastructure and real estate, analysts said.

Although exports are expected to hold up well, uncertainties remain due to potential escalation in trade frictions with the U.S. under President Donald Trump, after China’s surplus against the country hit a new high in 2017, analysts suggested.

“We have…long expected China’s domestic demand and imports to slow in 2018 on gradually tighter monetary and financial policies and slower real estate activity momentum,” Louis Kuijs, an economist with research firm Oxford Economics, said in a note.

“Export prospects remain solid, given our outlook for growth globally, although more forceful U.S. trade restrictions on China’s exports remain a key risk, following another rise in the U.S.’ bilateral trade deficit in 2017,” he said.

He estimated that, according to the American government’s means of calculation — which usually produce higher balance numbers than the Chinese numbers — China’s trade surplus against the U.S. may have reached $376 billion in 2017. That figure, if confirmed, would be higher than the existing record of $367 billion, logged in 2015.

China held a $275.9-billion trade surplus with the U.S. last year, up roughly 10% from 2016. The U.S. was China’s second-largest trade partner after the European Union, according to customs.

Trump has put tackling the growing trade deficit with China and boosting U.S. firms’ access to its markets among his top priorities since coming to power. His administration has slapped anti-dumping tariffs on a range of Chinese imports, such as aluminum and steel, and toughened its stance on Chinese investment in the U.S.

Washington has also launched the procedure for a probe into whether Chinese companies are stealing the intellectual property of U.S. companies. The investigation, based on the rarely-used Section 301 of the Trade Act of 1974, could be a precursor to retaliatory U.S. policies such as hefty tariffs on Chinese imports. The U.S. is expected to release the findings of the investigation soon.

A commerce ministry spokesman, Gao Feng, said at a briefing on Thursday that China will “adopt all measures necessary to firmly protect the country’s lawful interests and rights, should the U.S. perversely take unilateral protectionist actions.”

ANZ analyst Betty Wang said that even though a broad-based bilateral trade war is “highly unlikely” in 2018, it is possible that the U.S. will take “unilateral actions on Chinese exports in specific sectors.”

“Uncertainty surrounding Sino-U.S. trade ties might be a key potential downside risk in the near term,” she wrote in a report.

In December, China’s exports jumped 10.9% from a year ago to $231.8 billion, down from a 12.3% pace in the previous month. Imports grew 4.5% year-on-year in the month to $177.1 billion, slowing from a rise of 17.7% in November and the lowest reading in a year, according to the customs data. Last month marked the first time since mid-2016 that imports grew slower than exports.

“Export growth declined slightly last month but remained healthy. In contrast, import growth slowed sharply, raising questions over the state of domestic demand,” Julian Evans-Pritchard, an analyst with research firm Capital Economics in Singapore, said in a note.

He estimated that imports declined by the biggest margin in almost two years in volume terms in December as purchases of industrial commodities plummeted.

However, Kujis of Oxford Economics believes import growth will only soften moderately this year, as the Chinese government has been careful not to let its tightening measures deal blows to the economy.

“We do not think that the import slowdown this year is going to be as sharp as suggested by the December data, given that China’s policymakers continue to want to see credit and the economy cool gradually rather than fast,” he said.

Contact reporter Fran Wang (fangwang@caixin.com)

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