Gian Ship For Export - Photo by President Office

JAKARTA (TheInsiderStories) – China’s merchandise exports fell 4.4 percent year on year (YoY) in December in terms of US dollar, the second fastest drop in the same month in history, according to the General Administration of Customs. Meanwhile, exports recorded the first month-on-month (MoM) decline since 2009.

The headline weakness came as the demand from the United States (US), Japan and the European Union all contracted, while exports to ASEAN, Russia, India and Brazil continued to grow but at a slower pace compared to the average over the first 11 months. Slowing growth momentum of global economy and increasing negative impact from the China-US trade war led to a deterioration in overseas demand.

China’s merchandise imports declined 7.6 percent YoY measured in US dollar, the second sharpest fall since 2008. The larger-than-expected slowdown in imports despite the stronger yuan in December reflected declining commodity prices and weakening domestic demand.

Industrial production and retail sales growth softened to two-year lows and investment remained weak. Both the official and Caixin manufacturing purchasing managers (PMI) index by IHS Markit declined to below the 50-expansion threshold in December, indicating increasing downward pressure on the economy.

Trade surplus rose 6.0 percent YoY to $57.1 billion in December, the largest since 2016. The trade surplus for the whole 2018 was $341.8 billion, down 16.2 percent YoY, recording the lowest since 2013. However, China’s trade surplus against the US posted a record high last year.

According to Yating Xu, senior economist at IHS Markit, China’s exports are expected to weaken further in the first quarter of 2019 as global economic growth is losing momentum. The effect of the front-loaded demand prior to higher tariffs by the US on products from China, which underpinned the export growth over the past six months, will wane in 2019.

Export orders sub-index of PMI have contracted for seven straight months. Deterioration in exports will negatively impact on China’s manufacturing activities.

Soft growth in imports is expected to continue given slow domestic demand and downward trend in prices. The producer’s price index declined to 0.9 percent in December, the lowest in 27 months.

Further infrastructure stimulus and tax reduction are expected as part of the Chinese government’s efforts to mitigate the slowdown in economic growth and stabilize the employment market.

Written by Staff Editor, Email: theinsiderstories@gmail.com

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