Supply Chain Research

China’s international trade activity experienced a significant rebound in December. Panjiva’s analysis of official data shows total trade surged 11.3% higher compared to a year earlier, the first improvement since May. That was led in proportional terms by a 16.3% jump in imports which partly reflects an unusually weak month a year earlier as well as potential front-loading ahead of the earlier-than-usual lunar new year.

Exports climbed 7.6% after falling by 1.1% a month earlier. That was well ahead of the 3.2% expansion expected by analysts surveyed by Reuters. A year earlier may have seen depressed shipments ahead of expected – but delayed – U.S. tariff increases as well as the timing of the lunar new year.

Chart segments change in China’s international trade by direction on a monthly and three-month average basis. Calculations based on China General Customs Administration data. Source: Panjiva

The sources of China’s export recovery lie mostly in electronics and consumer goods. Exports of semiconductors and circuits have been strong throughout the year, but surged 34.8% higher in December. Exports of textiles and apparel jumped 8.6% after falling by 3.2% a month earlier while furniture rose 17.1% from a 9.8% decline. 

The autos sector – including parts and vehicles – climbed 7.7% higher from a 6.6% drop which is somewhat curious given slowing automotive sales globally fell 3.0% in November according to Ward’s automotive data. 

Of some concern, however, is that there was both a surge in exports of precious metals as well as a 9.2% bounce in exports of products where the Customs Administration does not provide granularity. Both make it difficult to be definitive that China’s rebound in December is based on sustainable rather than transitory issues.

Chart segments change in exports by product. Unspecified items include those where no granularity is provided in early customs figures. Calculations based on China General Customs Administration data. Source: Panjiva

Trade with the U.S continued to decline, including a 14.5% drop in exports to the U.S. That was slightly lower than the 20.5% rate in the prior three months but may have been enough to contribute to the decision by the U.S. Treasury department to remove China’s status as a currency manipulator. The latter was only applied in August though and is likely politically motivated ahead of tomorrow’s expected signing of a phase 1 trade deal.

As outlined in Panjiva’s research of Jan. 9 that deal will include significant commitments to increased purchases from the U.S. That process is already underway as shown by a 7.8% surge in imports from the U.S. in dollar terms compared to a 9.5% slide in the prior three months.

Chart segments change in Chinese trade with the U.S. by direction. Calculations based on China General Customs Administration data. Source: Panjiva