China’s trade surplus soared by 47% to reach a record high of US$382.4 billion in 2014, calming some investors and businessmen who were concerned about a possible slowdown in Asia’s largest economy. Exports rose by 6.1% and imports were 0.4% higher, according to China’s General Administration of Customs (GAC).

December’s results were particularly strong. During the last month of the year alone, the China trade surplus skyrocketed by 96.8%, while exports jumped by 9.9% and imports fell by 2.3% year-on year.

However, total trade in China expanded by only 3.4% – far below the government’s initial target of 7.4%. Officials in Beijing attributed the under-performance to economic weakness in the rest of the world. They say commodity prices, especially for oil and industrial metals, don’t help either.

“The world economy recovered rather slowly and couldn’t support China’s trade growing at a high speed,” said Zheng Yuesheng, a representative from the GAC.

 

A large part of Chinese imports go toward productive infrastructure and logistics, leading many to say that a high surplus is not necessarily a good thing for the country.

 

China Trade Surplus Doesn’t Help Larger Issues

While recent trade and manufacturing data has beaten analyst expectations, there are several economic issues that may force Chinese growth to fall below the 7%-10% range that the country has gotten used to in the past decade.

Some analysts believe that the record high surplus will cause volatility in the Yuan, which saw a steady decline against the U.S. Dollar during the second half of 2014.

“This divergence has made Chinese corporations become increasingly concerned about their large US dollar debt exposure” they wrote in a report, adding they could rush to buy dollars.” said Liu Li-Gang and Zhou Hao of ANZ Bank.

Likewise, Julian Evans-Pritchard at Capital Economics predicts that the lack of export demand will cause domestic consumption of raw materials to weaken, and that Chinese real estate prices are unlikely to continue their once stellar rise.

“We think that domestic demand, particularly for commodities, is likely to remain subdued and that those anticipating a stimulus-driven pick-up in investment or a marked turnaround in the property sector will be disappointed.”

As for the rest of the world, Evans-Pritchard is cautiously optimistic. “Although the global economy remains fragile we nonetheless expect growth in many of China’s key export markets, such as the US, to stage a slight recovery this year, which should provide support to Chinese exports,” he added.

 

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