MNI ANALYSIS: China Dec Exports Hit 2-Year Low; Imports Plunge

     BEIJING (MNI) - China's exports and imports both unexpectedly worsened in

December, adding another drag on the economy many expected to slow significantly

this year. 

     Exports fell by 4.4% y/y to USD221.25 billion in December, both at the

lowest in two years and lower than 4.8% y/y increase projected by an MNI survey

of economists. That dragged total exports for the year to a growth of 9.9% y/y

to USD2.49 trillion, compared with 11.8% growth in Jan-Nov period.

     "Trade growth may slow" in 2019 due to greater external uncertainties,

including slowing global growth and rising protectionism, as well as a higher

base of comparison, Li Kuiwen, a spokesman at the General Administration of

Customs, said in Beijing.

     Exports to the U.S. fell by 3.5% y/y in December, first drop in eight

months, while those to the EU and Japan contracted by 0.3% y/y and 1.0% y/y,

respectively.

     Chinese exporters are suffering due to shrinking orders from overseas as

well as lack of financing made difficult after the government tightened the

screw on the financial sector last year. 

     Imports plunged by 7.6% y/y in December, compared with growth of 3.0% y/y

in November, ending the consecutive growth in 25 straight months. Despite

December's drop, whole-year imports still rose 15.8% y/y at the value of USD2.14

trillion. 

     Imports fell 35.8% y/y with the U.S. and registered -2.7% and -11.4% with

the EU and Japan.

     --DIMMING OUTLOOK

     The outlook for January trade performance is expected to dim further. As

the Donald Trump administration early last year threatened to apply punitive

tariffs on Chinese exports, many exporters rushed to fill their orders. That

front-loading effect has worn off and now more people began to believe the trade

tension could last longer than expected.

     January's trade performance may be further worsened by the Chinese New Year

on Feb 5th, which is earlier than usual and may lead to more factories

shuttering. Chinese migrant workers residing and working at factories may take

as long as one month off to make their annual visits to rural homes.  

     --OPENING UP

     China began to boost imports after President Xi Jinping in March proposed

further opening up, lowering tariffs and boosting imports. China said it will

further open to foreign trade and investments, including hosting another imports

expo in November.

     Still, in a sign of weakening demand, imports growth dropped sharply in

November to 3.0% y/y.

     Weak trade statistics from December, together with series of economic

indicators including CPI (1.9% y/y in Dec), PPI (0.9% y/y in Dec) and PMI (49.4

in Dec), all showed the ongoing downward pressure on the Chinese economy.

     While the December trade numbers were bad, things can get worse this month.

One economist described 2018 as "the worst year in the past 10, the best year in

the future 10."

--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: flora.guo@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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