China’s Export Boom Defies Expectations Amid Trade Tensions
Surprising Growth in December
China’s export sector has bucked expectations, posting a significant 10.7% year-on-year growth in December, far surpassing the predicted 7.3% increase. This marks a notable uptick from November’s 6.7% growth and October’s 12.7% surge. Meanwhile, imports rose 1.0% last month, reversing a two-month contraction and exceeding forecasts of a 1.5% decline.
A Rare Bright Spot in China’s Economy
Exports have emerged as a beacon of hope in China’s struggling economy, which has been grappling with a prolonged real estate crisis and heightened trade tensions with major partners like the US and EU. As a result, the country has become increasingly reliant on exports to drive growth.
Economic Growth Expectations
Economists anticipate that trade will have played a significant role in supporting China’s economic growth last year. GDP data, set to be released later this week, is expected to reflect this trend. The country’s yuan-denominated total exports jumped 7.1% last year, accelerating from a modest 0.6% growth in 2023.
Sector-Specific Growth
Exports of electric vehicles and semiconductors saw notable increases of 13.1% and 18.7%, respectively, last year. However, the growth of these sectors could be threatened by the looming specter of higher tariffs on Chinese exports, particularly with the impending inauguration of US President-elect Donald Trump.
Policy Support and Stimulus
In response to the economic slowdown, Chinese authorities have implemented various policy measures to prop up the economy, including cutting interest rates, loosening property purchase restrictions, and injecting liquidity into the financial market. While these efforts have helped stabilize the economy, experts caution that a more significant stimulus package may be necessary to combat deflation.
Uncertainty Ahead
The uncertainty surrounding exports growth has created an additional reason for Beijing to adopt a cautious approach to stimulus, keeping some powder dry in case the tariff impact is severe. As China prepares to release its full-year and fourth-quarter GDP figures on Friday, all eyes will be on the country’s economic performance and its ability to navigate the complex trade landscape.
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