In December, China's imports experienced unexpected growth, while exports exceeded expectations as well.

• According to data from China's customs authority, both exports and imports in December exceeded expectations by a significant margin.
• In December, exports increased by 10.7%, surpassing the predicted growth rate of 7.3% as stated in a Reuters survey.
• Last month, China's imports increased by 1.0% compared to the same month the previous year, after experiencing a decline in the previous two months.

In December, China's trade data exceeded expectations by a significant amount, as exporters continued to ship goods ahead of time due to concerns about additional tariffs. Meanwhile, the country's stimulus measures appear to be boosting domestic consumption.

In December, China's customs authority showed that exports jumped 10.7% from the previous year, exceeding the expectation of a 7.3% growth, as reported in a Reuters poll. This is compared to the 6.7% growth in November and the 12.7% spike in October.

Imports increased by 1.0% last month compared to the same period a year ago, after two consecutive months of decline.

In contrast to the larger decreases of 3.9% in November and 2.3% in October, analysts had predicted that imports would only decline by 1.5% throughout the year.

In 2023, China's yuan-denominated total exports grew by 0.6%, but in 2024, they jumped by 7.1%, accelerating from the previous year's modest growth, customs officials announced at a press conference on Monday.

In 2023, China's imports increased by 2.3%, reversing a 0.3% decline from the previous year.

According to Zichun Huang, China economist at Capital Economics, we believe that increasing fiscal spending, which will likely remain focused on investment, will stimulate construction activity and increase demand for industrial commodities in the upcoming months.

The real estate market has experienced a prolonged crisis, leading to a decline in domestic demand and increased reliance on exports to drive economic growth.

Last year, China's economic growth was significantly boosted by trade, according to economists. GDP data will be released later this week.

Despite heightened trade tensions with its major trading partners, the US and the European Union, China's economy has seen some growth through exports. However, this growth could be threatened after US President-elect Donald Trump returns to the White House.

Last year, the customs officials reported that electric vehicle exports increased by 13.1%, while semiconductor exports saw a 18.7% increase.

Looming risks

On January 20, Trump, who will be inaugurated, has caused apprehension about increased tariffs on Chinese imports. He has promised to impose a 10% tariff on all Chinese products entering the US.

Since late September, Chinese authorities have intensified their policy support to bolster the country's economy, which is experiencing a slowdown and rising social tensions. However, Gabriel Wildau, managing director at Teneo, cautioned in a note last Friday that "a residue of caution and restraint remains."

The Chinese government has implemented measures such as cutting policy rates, easing property purchase restrictions, providing liquidity to the financial market, and introducing a debt-swap program to relieve local governments' financial pressures.

Despite acknowledging the need to increase real GDP growth, Xi seems hesitant to accept the additional stimulus necessary to combat deflation, according to Wildau.

"To have a sufficient response if the tariff impact is severe, policymakers should reserve some stimulus measures, according to him. He also pointed out that the uncertainty about exports growth adds to the need for Beijing to avoid a "big bang" stimulus approach."

This week, China will release its full-year and fourth-quarter GDP figures on Friday, with growth forecasted at 5.1% year on year in the final quarter of 2024, according to a Reuters poll.

This year, the top leadership has made it a priority to increase domestic consumption and allocate more funds for the consumer goods trade-in and equipment upgrade policy. The trade-in program, launched in July last year, offers consumers a discount on new cars or home appliances by subsidizing the exchange of old ones.

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