China's Exports Surge as Trade Tensions Rise

China's exports surged in December, Reuters reports, ending the year on a strong note even as trade tensions with the United States escalate. This comes as President-elect Donald Trump prepares to take office, threatening to impose tariffs on Chinese goods and potentially reigniting a trade war.

Outbound shipments increased by 10.7% year-on-year, exceeding economists' forecasts and accelerating from November's 6.7% growth, according to China's customs data. This acceleration is partly attributed to "trade frontloading," a phenomenon where companies expedite shipments in anticipation of potential future trade barriers.

"Trade frontloading became more visible in December as a result of both Chinese New Year effects and Donald Trump's inauguration," said Xu Tianchen, senior economist at the Economist Intelligence Unit, to Reuters.

Meanwhile, imports also surprised to the upside, expanding by 1.0%—the strongest performance since July 2024. This unexpected growth may be driven by Chinese companies stockpiling commodities like copper and iron ore, Xu Tianchen suggested.

This strong performance comes despite mounting trade challenges. The US has threatened hefty tariffs on Chinese goods, while unresolved disputes with the European Union regarding tariffs on Chinese electric vehicles threaten to hinder China's auto export ambitions.

Despite these headwinds, China's trade surplus expanded to $104.8 billion in December. A Chinese customs spokesperson expressed confidence in the potential for further import growth, stating there is "huge" room for the country's $18 trillion economy to expand imports this year.

The strong export momentum has been a key driver for China's economy, which has been facing challenges from a prolonged property market slump and weak consumer confidence. However, recent data suggests signs of stabilization following the government's recent stimulus measures.

Factory activity has shown modest expansion for three consecutive months, while services and construction sectors also recovered in December, official surveys indicate. South Korea, a key indicator of Chinese imports, reported an 8.6% increase in shipments to China in December, signaling continued demand for technology products.

China's iron ore imports reached a new peak in 2024, driven by lower prices and sustained demand, despite the property market downturn impacting steel demand. The world's largest agricultural importer also saw record soybean purchases last year, likely spurred by concerns over trade tensions with the US. However, crude oil imports declined last year, marking the first annual decrease in two decades.

China's leaders have pledged to loosen monetary policy and implement more proactive fiscal measures in 2025 to counter external pressures and boost domestic demand. The government's target of around 5% economic growth for the year remains a challenge.