China's exports grew at a faster pace in December, while deflationary pressures persisted last month, keeping alive expectations for more policy easing measures to shore up an economy carrying significant pockets of weakness into 2024.
Chinese policymakers could breathe a sigh of relief on signs global trade is slowly turning a corner with the prospect of lower borrowing costs on the horizon, but a protracted property crisis, cautious consumers and geopolitical challenges point to another bumpy year for the world's second-biggest economy.
Exports grew 2.3% from a year earlier in December, customs data showed on Friday, compared with a 0.5% increase in November and beating the 1.7% boost expected in a Reuters poll. Imports grew by 0.2% year-on-year, missing forecasts for a 0.3% increase but still reversing a 0.6% drop a month prior.
"The better export data is first and foremost driven by semiconductors and electronics, and the recovery on that side comes from a cyclical rebound in consumer demand overseas," said Xu Tianchen, senior economist at the Economist Intelligence Unit.
Xu said the figure was also buoyed by a low statistical base since "there was severe disruption to exports last December following China's abrupt reopening."
The improved Chinese export data joins those from South Korea, Germany and Taiwan in suggesting global trade is starting to mount a comeback, after higher interest rates in the United States and Europe crimped demand over 2023.
The United Nations has warned of a likely contraction in goods trade by $2 trillion or 8% last year.
South Korea's exports, a closely watched indicator of global trade, rose for a third month in December, while the latest German export data for November surprised on the upside.
Analysts also anticipate that interest rates will drop at least 1.5 percentage points in the United States and Europe this year, which should improve demand for imported goods.
And yet, consumer prices in China fell for a third month in December while factory-gate prices extended a more-than-year-long decline, separate data from the National Bureau of Statistics showed, highlighting the persistence of deflationary forces in the Asian giant's economy.
The consumer price index rose 0.2% in 2023, the slowest pace since 2009, and full-year producer price index fell 3.0%, marking the steepest downturn since 2015.
"The deflationary pressure in China's economy remains as domestic demand is still weak. The property sector continues to weigh on the economy," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
"Exports improved on the margin... but exports as a pillar for growth in China are not strong enough to boost overall domestic demand," he said.
Chinese policymakers also will have to contend with underpowered overseas economies, with the World Bank on Tuesday warning that global growth is set to slow for a third year in a row.
"New foreign orders for Chinese producers increased significantly last month, but it's not a long-term trend," said Dan Wang, chief economist at Hang Seng Bank China.
