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China Delivers Another Solid Trade Report

The Chinese economy ended 2017 in far better shape than most forecasters believed possible a year ago judging by the December and 2017 trade figures.

The country’s exports rose more than expected in December, while import growth slowed dramatically, helping to drive up the country’s trade surplus.

The dollar value of exports was up 10.9% year on year in December, down from November’s rate of 12.3% but ahead of forecasts from economists.

Growth in imports slowed to a year-on-year rise of just 4.5%, third of the 17.7% surge seen in November.

The slowing rate of growth boosted China’s trade surplus by about $US14 billion from November’s $US40.5 billion to a massive $US54.7 billion last month.

Despite that boost China’s overall trade surplus for 2017 was $US422.5 billion, a decline of 17% from 2016.

Exports for the full year rose 7.9%, the fastest rate since 2013, while imports were up a sizzling 15.9% - the best since 2011, thanks to China’s rising demand for commodities such s LNG, coal, iron ore, copper, soybeans and more.

In December though commodity imports were mixed, with copper purchases down 8.2% year-on-year by volume (and continuing the hesitant trend seen over the full year) while coal and natural gas imports were up.

Iron ore imports fell 11% in December to 84.14 million tonnes, down from the near record high of 94.54 million tonnes in November, data from China’s General Administration of Customs showed on Friday.

But for the full-year shipments rose 5% to a record of 1.075 billion tonnes, topping 1 billion tonnes for a second year.

That came as Chinese steel mills boosted production on the back of a strong recovery in steel prices that has pushed profits to their highest in nearly two decades, and in the face of cuts in production capacity - both permanent and temporary (in northern provinces for the winer season).

Steel exports slumped 30.5% to 75.43 million tonnes in 2017. That drop is unlikely to reverse easily as producers sell into higher margin local markets. This has also taken some of the heat off China’s trade rows in the US and other countries.

But imports of coal rose 6.1% to record 270.9 million tons in 2017, as the government’s drive to cut capacity at smaller, less efficient mines and safety inspections limited domestic production.

Another is curbing coal use and encouraging the use of cleaner natural gas instead. Imports of the fuel via both sea and pipeline surged almost 27% to 68.57 million tonnes in 2017.

The government also ordered less coal to be used in power production as part of its push to lower pollution levels in northern cities such as Beijing this winter. Gas has been substituted, but that saw demand soar in the closing months of 2017.

As a result, gas imports via both sea and pipeline surged almost 27% to a record 68.57 million tonnes in 2017, and hit 7.87 million tonnes in December alone.

China’s crude oil imports in December eased to 33.7 million tonnes, or 7.97 million barrels a day, against 37.04 million tonnes in November and its oil products exports hit a record 6.17 million tonnes last month.

Over 2017, oil imports jumped by about 10% to average 8.43 million barrels a day, or 420 million tonnes which was a new high. China’s copper ore and concentrate imports rose 2.3% to a record 17.35 million tons in 2017, but with more concentrate being converted to finished material within China, imports of unwrought copper and copper metal products have fallen, with shipments dropping 5.2% in 2017 from 2016.

China’s taste for soybeans showed no slackening - 2017 imports jumped 13.9% in 2017 to a record 95.54 million tonnes and could easily hit 100 million tonnes this year.

On Thursday China releases its 4th-quarter and 2017 economic growth figures.

GDP is forecast to have grown 6.7% year on year in the fourth quarter, down a touch from 6.8% in the previous period.

Premier Li Keqiang said last week that China’s economy outperformed expectations thanks to supply-side reforms and forecast 6.9% growth for all of 2017.

The government set a target of “around 6.5%” growth for 2017.

Data on 4th quarter and 2017 industrial production, retail sales and investment are also due for release.

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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