Exports in China picked up pace for the second consecutive month in December, as per a Reuters poll, as signs get visible on improved global trade. These signs of recovery can be associated with a surge in the electronics sector and expectations of rate cuts in 2024.
Exports from the world’s second largest economy and the largest exporter are expected to have increased by 1.7% in December compared to the previous year. This marked an end to the seven month downtrend as it grew 0.5% in November and continued the growth in December.
Overall global trade figures were discouraging in 2023 due to the high borrowing costs in the USA, Europe and other economies of the world crippled the consumer demand across the globe.
The United Nations also warned that trade in physical goods likely contracted by more than 8% in the year 2023; However, an improved trade data from South Korea, Germany and China indicates that the conditions are slowly getting better.
Like China, the export figures of South Korea are seen as an important indicator of global trade, which rose for the third-consecutive month in December. Meanwhile, Germany’s export data came as a surprise for everyone as it marked an increase of 3.7% in November from the previous month.
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The Optimism
The news that China, along with other major economy’s exports have picked up pace in the last couple of months, is giving an air of optimism in the environment. Analysts are anticipating the interest rates to fall by more than 1.5% in Europe and the United States in 2024, which would further increase demand for imported goods and would encourage trade.
Xu Tianchen, a senior economist at the Economist Intelligence Unit said that, “there’s increasing evidence that a cyclical upturn in the global electronics industry is driving a bottoming-out of global trade.” His assumption was based on a better than expected exports growth in Taiwan in the month of December, coupled with a stronger demand for electronics and high-tech products from the United States.
Thus he noted it in these words, “this gives us reason for optimism about a rosier trade picture in 2024.”
Moreover, China’s trade data, which is set to be released later this week, is expected to show a growth of 0.3% in imports after it dropped by 0.6% in November. However, the imports from tech giants, South Korea and Taiwan fell by 2.9% and a massive 6.4% on an yearly basis, respectively. Germany’s exports to China did increase by 3.1% in November, compared to a month earlier.
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The United Nations
The United Nations Conference on Trade and Development held a monthly global trade update in December, where it noted that the forecasts for the global trade in 2024 remains “highly certain and generally pessimistic.”
It noted that global trade activities, which is generally represented by the Baltic Dry Index, fell by a massive 7.3% to its lowest point since November 23 on Tuesday. This massive fall indicates the challenges faced by the shipping companies due to an uncertain and violent Middle East.
The average estimates in Reuters poll conducted with 32 economists, forecasted that China’s trade surplus would improve further in December, reaching at $74.8 billion from $68.4 billion in the previous month.
