China December Exports Tumble More Sharply Than Expected

by Mark Magnier | January 13, 2017

The country is bracing for further difficulties this year given the prospect of a more protectionist U.S. administration
BEIJING—Chinese exports fell sharply last month owing to weak demand in many major markets, and the government and economists are bracing for further difficulties this year given the prospect of a more protectionist Trump administration.
Exports slipped 6.1% in December from a year earlier compared with a 0.1% gain in November, China’s customs administration said Friday. December’s decline was steeper than the drop of 3% that was the median estimate of 11 economists polled by The Wall Street Journal. It also made December the eighth month out of the past nine in which exports fell, with November’s small increase the exception.
Imports in December rose 3.1% from a year earlier, roughly in line with expectations, compared with a 6.7% gain in November. China’s trade surplus narrowed last month more than expected to $40.82 billion from $44.61 billion in November.
Overall in 2016, exports fell 7.7% and imports declined 5.5%, resulting in an annual trade surplus of $510 billion, below the $594.5 billion trade surplus in 2015.
Chinese exports saw slipping demand across all major regions except the U.S., which saw a 5% increase, according to the customs data. Though economists said the weaker numbers also reflected a less favorable comparison with year-earlier data, when exports were relatively strong, anemic demand and trade tensions cloud the outlook for a return to more robust trade.
“Overall, exports will face challenges over the next couple of quarters,” said RHB Group economist Fan Zhang. He said it is very likely a Trump administration will “play hardball” with China.
Chinese officials are sounding sober about the economic and political headwinds China is facing. Customs spokesman Huang Songping at a briefing on Friday called China “the biggest victim” in the anti-globalization trend. 
Ministry of Commerce spokesman Sun Jiwen, a day earlier, cited mounting protectionism as a challenge and said that Beijing will “try all methods” to stabilize trade, including steps to help exporters expand foreign markets and become more competitive.
Companies too said that they’re feeling the pinch and are concerned that trade tensions lie ahead.
Hejian Yongxing Tableware Factory, which exports knives, bowls and pots to the U.S. and Europe from its base in the northern city of Hejian, said sales are down while labor and raw material costs are up a total of 30% in recent months, forcing it to increase prices.
“That’s led to an obvious decline in orders and our profits are squeezed a lot,” said Chu Liping, the company’s general manager. “And if Mr. Trump increases trade tariffs, business will be even tougher.”
Beijing has allowed China’s currency to fall against the dollar—it depreciated 7% last year—but the yuan appreciated 1% in 2016 against a trade-weighted basket of currencies. Mr. Huang said Friday the impact on trade of the yuan’s depreciation against the dollar is limited.
Economists said any higher tariffs or related policies enacted by the incoming Trump administration that reduce U.S.-China trade could undercut broader growth in the world’s second-largest economy, which has been steady.
“More protectionist trade policies, including higher tariffs or trade tension, could weigh on sentiment as well as economic activity,” said HSBC Holdings PLC in a report. It said that China is likely to respond to any trade tensions with the U.S. by accelerating trade and investment links with other emerging markets.
December’s uptick in imports was due in part to higher global commodity prices, economists said, and that too could moderate in coming months.
Some economists said China is unlikely to issue a foreign trade growth target this year for the second year in a row after missing its benchmark by wide margins in 2013, 2014 and 2015. 

Source: The Wall Street Journal