China's December trade numbers point to relatively stable domestic activity but indicate continued weak global trade. Exports fell 6.1% from the same month last year. There are few events on the horizon that are likely to push exports higher. But, against a weak global demand backdrop, downside risks to external demand are rising with the revival of protectionist trends across the globe. Exports will likely remain weak and growth will remain driven by domestic factors for months to come.
Total imports, including those meant for global supply-chain processing, rose 3.1% from December last year. Imports meant for domestic use are holding up relatively well, up 5.1%, pointing to stable but lackluster economic activity. Some big ticket items saw a drop in demand, most notably a 28% decline in aircraft shipments.
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Here are some key numbers in the data:
- Trade for processing continued to decline, indicating either global demand is still very weak, or more manufacturing assembly is being done close to home. Exports and imports for trade processing declined 6.5% and 2.5% from last year, respectively.
- Capital outflows hidden in trade invoices have disappeared. Year on year Hong Kong import numbers have come down dramatically from a peak rise of 242% early this year, falling 61% in December. China is still experiencing capital outflows, as evidenced by declining foreign exchange reserves. But, those flows are not being hidden in Hong Kong trade invoices anymore. Mainland Chinese residents have found new methods to get around capital controls.
- Exports to the US rose 5.5%, but exports to the EU declined 4.7%.
- Commodity import demand was mixed in December. By volume, iron ore and soybeans dropped 8% and 1% respectively. Crude and copper imports were up from last year, 10% and 13%. On a value basis, most commodities saw an increase in shipments to China on the back of rising prices over the last year.
- 2016 was a record year for imports of copper and iron ore driven by the resurgent housing market.
- Trade with manufacturing-oriented economies declined overall, with exports to Singapore falling 12%, the furthest among major trading partners.