China reported a record trade surplus for 2022, as its key export sector delivered robust growth for most of last year, providing much-needed support for the world’s second largest economy that’s hammered by its zero-Covid policy.
But plunging shipments in December suggest exports are likely to struggle in early 2023 as the global economy weakens.
The country’s total trade of goods hit an all-time high in 2022, reaching 42.07 trillion yuan ($6.3 trillion), up 7.7% from 2021, according to data released by the General Administration of Customs on Friday.
Measured in US dollars, exports jumped 7% in 2022, while imports increased 1.1%. That translates into a trade surplus of $877.6 billion, surpassing 2021’s record of $676 billion.
The huge trade surplus was thanks to strong export growth during the first quarter of 2022, as a weak Chinese currency and rising prices of goods helped boost the value of exports.
However, the trend started to shift in October. Exports dropped 0.3% that month, the first decline since mid-2020. They fell further in November by 8.7%.
Friday’s data showed that the contraction deepened in December, as exports plunged 9.9%, the worst drop since the the start of the coronavirus outbreak in February 2020.
“This drop can be pinned on weakening global demand for Chinese goods, as well as some disruption to logistics networks and goods supply due to labor shortages amid the reopening wave of infections,” said Capital Economics analysts in a Friday research note.
China abruptly dismantled its rigid zero-Covid policy in early December. But the sudden shift caught the public off guard, with infections surging across the country. That has caused disruptions to factory production and consumer activity.
Imports slumped 7.5% in December, which was slightly better than November’s 10.6% drop. Analysts expect China’s reopening to boost imports, but exports will still struggle over the coming quarters.
“The rapid fading of virus disruptions as China adapts to living with Covid-19, along with broader policy support, will drive a sharp recovery in domestic demand that will lift imports,” the Capital economics analysts said.
However, “with growth outside of China still slowing, exports may continue to contract until the middle of the year,” they said.
China also announced Friday its trade with Russia hit a new record high in 2022.
The goods trade between the two countries reached 1.28 trillion yuan ($190 billion) last year, up more than 30% from 2021, according to Lyu Daliang, the spokesman for the customs authority.
That currently accounts for 3% of China’s total trade, he added. The two countries have forged much closer economic ties since Russian President Vladimir Putin visited Beijing in February 2022, shortly before Moscow invaded Ukraine.
Previous customs statistics showed China had snapped up oil and coal from Russia. In November, Russia surpassed Saudi Arabia to become China’s top crude oil supplier, according to customs data released last month.