China’s exports in December up 10.7%, beating estimates as higher US tariffs loom

China's export growth in December exceeded expectations, mainly due to factories rushing to complete orders before then-incoming U.S. President Donald Trump threatened to impose tariffs. According to official customs data released on Monday, exports increased by 10.7% year-on-year, while economists had previously predicted a growth rate of around 7%. Imports increased by 1% year-on-year, while analysts had previously expected a decline of about 1.5%. As exports exceeded imports, China's trade surplus in December increased to $104.84 billion, with the full-year trade surplus reaching nearly $1 trillion, at $992.2 billion.

Trump had pledged to raise tariffs on Chinese goods and close loopholes that some exporters currently use to sell products at lower prices in the U.S. If his plans are implemented, it could lead to higher prices in the U.S. and squeeze the sales and profit margins of Chinese exporters. Capital Economics' Huang Zichun said that China's exports are likely to remain strong in the short term as companies try to "front-run" potential higher tariffs. "Shipments are likely to remain resilient in the near term, supported by a weaker real effective exchange rate and further gains in global market share," she wrote in a report. In December, China's exports to the U.S. increased by 15.6% year-on-year, exports to the EU increased by 8.8% year-on-year, and shipments to Southeast Asia increased by nearly 19%. However, Huang Zichun said that if Trump fulfills his threat to impose tariffs, exports may weaken later this year.

Officials briefing reporters in Beijing said that China's total imports and exports reached a record 43.85 trillion yuan (nearly $6 trillion), a year-on-year increase of 5%. Wang Lingjun, Deputy Director of the General Administration of Customs, stated that China is the world's largest exporter and a major trading partner for more than 150 countries and regions. After the pandemic, China's economy has slowed down, partly due to unemployment and a sluggish real estate sector, while exports have grown significantly. Under the leadership of President Xi Jinping, the ruling Communist Party is promoting factory upgrades and a shift towards more high-tech manufacturing. The report on Monday stated that China's exports of electromechanical products increased by nearly 9% year-on-year last year, with exports of "high-end equipment" increasing by more than 40%. Exports of electric vehicles increased by 13%, exports of 3D printers increased by nearly 33%, and shipments of industrial robots surged by 45%. E-commerce trade, including companies like Temu, Shein, and Alibaba, reached 2.6 trillion yuan ($350 billion), more than double that of 2020.

Officials said that China does not pursue a trade surplus and wants to increase imports. However, although imports increased slightly last year, they still lagged behind exports, partly due to falling prices of major commodities such as oil and iron ore. The lag in imports also reflects weak demand caused by reduced consumer and business spending. "Regarding imports this year, we believe there is still a lot of room for growth. This is not only because our country has a large market capacity, multiple levels, and great potential," said Lu Daliang, a spokesperson for the General Administration of Customs. Lu Daliang also stated that China is also prohibited from exporting and importing certain products due to trade restrictions, and he implied that the U.S. and some other countries have imposed controls on exports to China of strategically sensitive products, such as advanced semiconductors and items that can be used for military purposes. "In addition, some countries politicize economic and trade issues, abuse export control measures, and unreasonably restrict the export of some products to China, otherwise we would import more," he said.

Officials highlighted China's efforts to expand trade with countries participating in its "Belt and Road" initiative, which aims to expand infrastructure construction and trade in most parts of the world. Last year, trade with these countries accounted for about half of China's total trade. They pointed out that China has completely eliminated import tariffs on goods from the world's poorest countries. But China also values trade with traditional markets such as Europe and the United States, with bilateral trade with the U.S. growing by nearly 5% last year. "We import agricultural products, energy products, medicines, and airplanes from the United States, and export clothing, consumer electronics, and home appliances to the United States, achieving mutual benefit and win-win results," Wang Lingjun said. U.S. officials and other critics have said that Beijing has been pushing to expand exports to make up for weak domestic demand due to China's economic slowdown. They argue that there is a problem of "overcapacity" in China, as factories in some industries are operating far below capacity, while Chinese officials have rejected this claim. "Whether from the perspective of comparative advantage or global market demand, there is no such thing as 'China's overcapacity.' This issue is purely a false proposition," Wang Lingjun said when asked about the issue. He stated that China has improved industrial efficiency through research and development-supported upgrades, investment, and innovation. "We have ensured the stability of global production and supply chains with our complete manufacturing industrial chain and promoted global technological progress and industrial upgrading." China's December trade data was released ahead of its annual and fourth-quarter gross domestic product (GDP) data, which will be released on Friday. Beijing has set a growth target of about 5% for 2024.