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Chinese Customs Data Outperforms, Exports See Slower Growth

·2 min read

By Gina Lee

Investing.com – Chinese exports exceeded growth expectations in December, according to customs data released earlier in the day, with continuous COVID-19 outbreaks fueling demand for Chinese goods although overseas buyers paid more for them thanks to a stronger yuan.

The data showed that all metrics outperformed. Exports grew 18.1% year-on-year against the 15% in forecasts prepared by Investing.com, but was lower than the 21.1% growth seen in November. Imports grew 6.5% year-on-year, beating the forecast 5% growth and November’s 4.5% growth.

The impressive rebound in China’s manufacturing sector in 2020 was largely driven by buoyant exports as the world faced the COVID-19 pandemic. The country is expected to be the only major economy to see positive growth in 2020, with exports growing 3.6% over the full year and imports falling 1.1%.

While COVID-19 will bring challenges, a reviving global economy and a steady recovery in China’s domestic economy provide a foundation for China to maintain trade growth in 2021, customs spokesman Liu Kuiwen said at a briefing.

Chinese exports are expected to see continuous support from the sustained demand for medical supplies and work-from-home products as trading partners continue to deal with COVID-19 outbreaks.

However, worries are mounting that the stronger yuan and rising raw material price could squeeze exporters’ profits. The yuan strengthened 6.7% in 2020 onshore trade, the first annual rise in three years.

“Exports continued to do well last month, as renewed lockdowns abroad ensured the shift in consumption from services to goods persisted in many of China’s trading partners,” Capital Economics senior China economist Julian Evans-Pritchard said in a note.

But Evans-Pritchard expects exports and imports to fall in late 2021 as the stimulus rolled out in 2020 runs out and overseas consumption returns to pre-COVID-19 patterns as vaccines boost a recovery.

“We think trade will remain resilient in the near-term but will soften later this year,” the note added.

Meanwhile, China’s trade balance was $78.17 billion in December, the highest reading on Refinitiv records going back to 2007. It was also higher than the forecast of $72.35 billion and November’s $75.40 billion figure.

The country’s trade surplus with the U.S., the country with which a bitter trade war has been waged in the last few years, narrowed to $29.92 billion in December from November’s $37.42 billion.

U.S. President-elect Joe Biden has indicated that he will not immediately cancel the phase one trade agreement that incumbent President Donald Trump struck with China in February 2020. Biden also said that he would not take steps to remove the current tariffs on Chinese exports.

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