Chinese trade balance: the worst is over? – UOB

Economist Ho Woei Chen, CFA, at UOB Group assessed the latest Chinese trade balance figures.

Key Quotes

“China’s trade numbers rebounded strongly in Dec in signs that global trade weakness may have bottomed out amidst the trade truce between US and China. The recovery was also partly due to a low base effect.”

“In USD terms, exports rose 7.6% y/y in Dec, well above consensus forecast of 2.9% y/y (Nov: -1.3% y/y) and was the first expansion recorded in five months. Imports surged 16.3% y/y in Dec (Nov: +0.3% y/y) to top consensus forecast of 9.6% y/y. The trade surplus widened to US$46.79 bn in Dec from US$38.73bn in Nov, highest in six months.”

“Overall for 2019, China recorded export and import growth of +0.5% and -2.8% compared to +9.9% and +15.8% in 2018 respectively. The contraction in annual imports was the first since 2016, reflecting the slowdown in the economy. Total trade surplus rose to US$421.51bn in 2019 from US$350.95bn in 2018, the first annual increase after falling in the last three years. Meanwhile, China’s trade surplus with the US narrowed to US$295.43bn in 2019 from US$324.45bn in 2018, which could ease some concerns from US on the sustainability of the trade imbalances.”

“With the expected signing of the Phase One US-China trade deal, tensions between the two countries are not expected to re-escalate in the near-term, giving room for optimism that we may have seen the worst in China’s trade numbers.”