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China's economy weakens as December exports and imports contract

CHINA's exports unexpectedly fell the most in two years in December, while imports also contracted, pointing to further weakness in the world's second-largest economy in 2019 and deteriorating global demand

China's economy weakens as December exports and imports contract

CHINA's exports unexpectedly fell the most in two years in December, while imports also contracted, pointing to further weakness in the world's second-largest economy in 2019 and deteriorating global demand

15 January 2019 - 19:00

CHINA's exports unexpectedly fell the most in two years in December, while imports also contracted, pointing to further weakness in the world's second-largest economy in 2019 and deteriorating global demand.

China's December exports unexpectedly fell 4.4 per cent from a year earlier, with demand in most of its major markets weakening. Imports also saw a shock drop, falling 7.6 per cent in their biggest decline since July 2016.



Analysts had expected export growth to slow to 3 per cent with imports up 5 per cent in December.



China exports to the US declined 3.5 per cent in December while its imports from the US were down 35.8 per cent for the month.



The latest statistics also showed China posted its biggest trade surplus with the United States on record in 2018, which could prompt US President Donald Trump to turn up the heat on Beijing in their bitter trade dispute, reports Reuters.



China's politically-sensitive surplus with the US widened by 17.2 per cent to US$323.32 billion last year, the highest on record going back to 2006, according to Reuters calculations based on customs data.



China's total global exports rose 9.9 per cent in 2018, its strongest performance in seven years, while imports increased 15.8 per cent.



But December's gloomy data, along with several months of falling factory orders, suggest a further weakening in its exports in the near term.



'Today's data reflect an end to export front-loading and the start of payback effects, while the global slowdown could also weigh on China's exports,' Nomura economists wrote in a note, referring to a surge in shipments to the US over much of last year as companies rushed to beat further tariffs.



'The export growth print also suggests that the recent strength of the yuan might be short-lived; Beijing will perhaps be more eager to strike a trade deal with the US; and that policymakers will need to take more aggressive measures to stabilise GDP growth.'



Softening demand in China is being felt around the world, with slowing sales of goods from iPhones to automobiles, prompting warnings from the likes of Apple and from Jaguar Land Rover, which last week announced sweeping job cuts.



'A trade recession is likely, in our view,' Raymond Yeung, chief economist at ANZ, said in a note, predicting a period of export contraction similar to 2015-16.



'The global electronics cycle remains the key driver of Chinese exports. A potential downturn in the sector poses the real risk to China's external outlook even if China and the US reach a resolution on their trade dispute.'



ING said a fall in electronic shipments could be related to foreign companies avoiding using China-made electronic components, adding that exports and imports of electronic parts and goods will likely shrink this year.



Sources told Reuters last week that Beijing is planning to lower its economic growth target to 6-6.5 per cent this year after an expected 6.6 per cent in 2018, the slowest pace in 28 years.


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