China posts record trade surplus on robust exports

China posted a record trade surplus in December and in 2021, as exports outperformed expectations amid a global pandemic, but some analysts are pointing to a slowdown in international shipments in the coming months.

The trade surplus hit $676.43 billion (€589.94 billion) in 2021, the highest since records started in 1950, up from $523.99 billion in 2020, according to data from the statistics bureau.

China also posted a record trade surplus for the month of December as exports remained robust while import growth slowed sharply, customs data showed on Friday.

The trade surplus rose to $94.46 billion in December, the highest since record started in August 1994, up sharply from a $71.72 billion surplus in November and above a forecast for a $74.50 billion surplus in a Reuters poll.

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Exports increased 20.9 per cent year-on-year last month, beating expectations for a 20 per cent rise, but down from a 22 per cent gain in November.

"Exports remained strong last month but may soften in the coming months amid growing disruptions at ports," said Julian Evans-Pritchard, senior China economist at Capital Economics, in a note.

China reported a total of 143 local confirmed COVID-19 cases for Jan. 13, its health authority said on Friday, including in the key northern port city of Tianjin.

“Meanwhile, imports dropped back sharply, consistent with continued domestic weakness, especially in the property sector,” said Evans-Pritchard.

Imports rose 19.5 per cent year-on-year in December, the customs data showed, missing a forecast for a 26.3 per cent rise and down sharply from a 31.7 per cent gain in November.

The world’s second-largest economy has staged an impressive recovery from the pandemic, with exports helping to buoy growth as several other sectors were faltering, but there are signs the momentum is flagging. A property downturn and strict Covid-19 curbs are among the headwinds clouding the outlook for 2022.

China’s economic growth is likely to slow to 5.2 per cent in 2022, before steadying in 2023, a Reuters poll showed, as the central bank steadily ramps up policy easing to ward off a sharper downturn.

Customs data showed China’s imports of the key steelmaking ingredient iron ore slipped from the month before on steel production curbs and slowing property construction.

For all of 2021, total exports rose 29.9 per cent, compared to a 3.6 per cent gain in 2020. Imports for the year gained 30.1 per cent, after falling 1.1 percent in 2020.

Exports outlook

China’s exports outperformed expectations for much of 2021, but shipments have been slowing as an overseas surge in demand for goods eases and high costs pressure exporters.

It was unclear how the emergence of the Omicron coronavirus variant would affect that trend.

Zhang Zhiwei, chief economist at Pinpoint Asset Management, said in a note that China's exports may have benefited from Omicron's disruption to other countries' supply chains.

“We expect China’s exports to remain strong in Q1 because of resilient global demand and worsening pandemic in many developing countries. Currently the strong exports may be the only driver helping China’s economy,” said Zhang.

China’s vice commerce minister said on December 30th that the country will face an unprecedented degree of difficulty in stabilising foreign trade in 2022, as other exporters ramp up production and amid a less-favourable base of comparison.

The country will roll out more policies to help exporters and ease the pressure of international logistics problems, the official Xinhua news agency said in late December, citing a meeting of the State Council chaired by Premier Li Keqiang.

- Reuters