China’s Economy Shows Signs of Recovery Amid Trade Uncertainty
As the world waits with bated breath for the inauguration of U.S. President-elect Donald Trump, China’s economy is showing signs of resilience. Despite the looming threat of trade tariffs, China’s exports surged 10.7% in December, beating forecasts and marking a significant turnaround from November’s 6.7% increase.
Exports: A Vital Growth Engine
Exports have long been a crucial driver of China’s $18 trillion economy, which has been grappling with a prolonged property crisis and shaky consumer confidence. The recent uptick in exports is a welcome respite for policymakers, who are working to keep the economy on track for an “around 5%” growth target.
Trade Tensions Cloud the Outlook
However, the outlook for 2025 remains uncertain, with potential U.S. tariff hikes and unresolved disputes with the European Union threatening to hinder China’s ambitions to expand its auto exports and address deflationary overcapacity concerns. The proposed tariffs on Chinese goods have sparked fears of a renewed trade war between the two superpowers.
Stockpiling Commodities
According to Xu Tianchen, senior economist at the Economist Intelligence Unit, “trade front-loading became more visible in December as a result of both Chinese New Year effects and Donald Trump’s inauguration.” This has led to stockpiling of commodities like copper and iron ore, as part of China’s “buy low” strategy.
Imports Show Surprise Growth
Imports also surprised to the upside, with 1.0% growth, the strongest performance since July 2024. Economists had expected a 1.5% decline. China’s trade surplus grew to $104.8 billion last month, up from $97.4 billion in November.
Manufacturers Find Buyers Overseas
Buoyed by a weakening yuan, Chinese manufacturers managed to find buyers overseas in 2024 to compensate for depressed domestic demand by continually reducing prices, analysts said. As a result, China’s exports grew by an annual 5.9% last year, while imports increased just 1.1% over the same period.
Domestic Demand Recovery Still Shallow
Despite the positive trade data, Barclays analysts noted that the modest increase in imports and easing CPI inflation suggest the recent domestic demand recovery is still too shallow and too weak.
Signs of Stabilization Emerge
However, signs of stabilization have emerged following China’s recent stimulus push. Factory activity remained in modest expansion for the third consecutive month, while services and construction recovered in December, an official survey showed.
Iron Ore and Soybean Imports Rise
China’s iron ore imports in 2024 rose for a second straight year to hit a new peak, as lower prices spurred buying and demand remained resilient despite the country’s protracted property crisis continuing to weigh on steel demand. The world’s largest agricultural importer also bought a record amount of soybeans last year.
Crude Oil Imports Fall
However, crude oil imports fell last year, marking its first annual decline in the last two decades outside the COVID-19 pandemic-induced falls, as tepid economic growth and peaking fuel consumption dampened purchases.
Government Pledges Support
China’s top leaders have pledged to loosen monetary policy and adopt a more proactive fiscal policy in 2025, aiming to offset external pressures and revitalise domestic demand. The government is targeting economic growth of around 5% for the year, a goal that had proved challenging to achieve at times in 2024.
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