LAUNCESTON, Australia (Reuters) - Anybody reading the commentary on China’s December trade figures would be left with the impression of an economy increasingly losing momentum amid a dispute with the United States.
It was reasonable for analysts to zero in on the 4.4 percent drop in China’s December exports from a year earlier, a huge miss when a rise of 3 percent had been forecast.
Imports also surprised on the downside, dropping 7.6 percent in December, the biggest decline since July 2016.
The numbers do point to weakness in the world’s second-largest economy, and the trade dispute with the administration of U.S. President Donald Trump is getting much of the blame.
The weakness in exports could be put down to the pull-forward effect in prior months as both producers and buyers stocked up ahead of the imposition of U.S. tariffs on a range of Chinese goods.
The poor trade numbers also came despite efforts by Beijing to stimulate the economy in a series of measures, from looser credit to tax cuts to infrastructure spending.
The trade data was grist to the mill for those taking the view that China’s economy is struggling, that the United States is “winning” the trade dispute, and that Beijing will be forced to compromise on Trump’s terms.
This may well turn out to be the case, but there are also trade numbers that paint an entirely different view of the Chinese economy, namely the volume of commodity imports.
Crude oil imports surged nearly 30 percent in December from the same month in 2017, reaching 10.31 million barrels per day (bpd), the second-highest monthly outcome on record.
That hardly sounds like a weak outcome, even if the likely explanation is that smaller, independent refiners boosted purchases to use up 2018 import quotas before they expired.
Overall, China’s 2018 crude imports rose by 10.1 percent to a record 9,24 million bpd, an increase of 846,000 bpd over 2017.
Boosting annual crude imports by the equivalent of the total consumption of a country such as Netherlands cannot be construed as weak either.
A history lesson on past-year crude imports, though, doesn’t say much about what’s likely to happen in 2019, but so far there is little reason to expect the imports to tail off.
China is still building its strategic petroleum reserves and the sharp drop in crude prices in the previous months is likely to encourage more buying for storage.
It’s not just crude oil. Imports of natural gas, by pipeline and as liquefied natural gas (LNG), hit a record high of 9.23 million tonnes in December, up 17 percent from the same month of 2017 and eclipsing the previous record high from November.
That means China has imported record amounts of natural gas for two consecutive months, again, hard numbers that don’t quite tally with the view of an economy in distress.
It could be the case that energy imports are staying strong, while those of metals, which are more exposed to weakness in manufacturing, are feeling more pain.
Imports of unwrought copper dropped to 429,000 tonnes in December, down 4.7 percent from the same month in 2017 and by the same margin from November.
Imports in November were also weaker than in the same month in 2017, indicating some softness toward the end of the year, notwithstanding the strong 12.9 percent gain in copper imports for 2018 as a whole.
Iron ore imports also look uninspiring, with December’s 86.65 million tonnes up 3 percent from the same month a year earlier, but not enough to prevent a 1 percent drop across 2018 as a whole, the first annual decline since 2010.
However, China’s steel output is likely to hit a record high in 2018, with output for the first 11 months rising 6.7 percent to 857.37 million tonnes from the same period in 2017.
What this shows is that China’s switch to higher-grade iron ore in order to maximise the output of blast furnaces meant steel mills were able to boost production without having to import more iron ore.
Again, this is hardly a weak outcome, but likewise doesn’t shed much light on the probable trends for 2019.
Coal was one commodity that looked weak in December, with imports plunging 55 percent from the same month in 2017 to just 10.23 million tonnes.
But this was entirely policy driven, with Beijing putting pressure on traders to curb imports as they didn’t want total inbound coal shipments in 2018 to exceed those for 2017.
Despite the slump in December, imports for the full year were up 3.9 percent to 281.23 million tonnes, a four-year high.
Coal imports may remain restrained in the early months of 2019 amid an official push to use more domestic coal to boost prices for local miners.
Overall, if you were to assess the Chinese economy on its commodity imports, you’d likely reach quite a different conclusion than if you focused only on the U.S. dollar value of total exports and imports.
Weaker commodity prices lowered the value of imports in the latter part of 2018, but if anything, also served to boost volumes.
China’s economy does appear to be losing some growth momentum, but it doesn’t seem to make much sense to look only at imports and exports from a dollar perspective, and not take volumes into account.
(Graphic: China's trade and economy: tmsnrt.rs/2iO9Q6a)
The opinions expressed here are those of the author, a columnist for Reuters.
Editing by Tom Hogue