China's economy is poor in 2023 and the outlook is not good.
Exports fell for the first time since 2016 as global demand for Chinese-made goods (except cars) declined for the first time since 2016, according to customs data released on Friday. Reversing this decline in 2024 will be difficult, officials said.
That wasn't the only dark data released by China on Friday. The world's second-largest economy is struggling to fend off deflationary pressures. Consumer price inflation in 2023 was the weakest in 14 years.
The consumer price index for December improved slightly from November, but fell 0.3% over the same month in 2022, the Office for National Statistics said on Friday. For 2023 as a whole, prices rose just 0.2% from 2022, the weakest reading since 2009, when CPI fell 0.7% due to the global recession.
China is doubling down on weak demand at home and abroad.
Exports measured in US dollar terms are expected to reach $3.38 trillion in 2023, down 4.6% from the previous year. In 2022, Chinese exports 7% increase from previous year. China's overseas exports fell last year in 2016, when exports fell 7.7%.
Last year's imports also fell 5.5% to $2.56 trillion. It became the world's second largest economy with a trade surplus of $823 billion.
“The global economic recovery has been weak over the past year,” Liu Daliang, spokesman for the General Administration of Customs, said at a press conference in Beijing on Friday. “Slow External Demand Hits China's Exports.”
He expects China to continue to face “difficulties” in export markets as global demand remains weak and “protectionism and unilateralism” hamper growth.
Pork is for sale at a wholesale market in Beijing, China on January 12, 2023.
December marked the third straight month in which the measure of consumer inflation fell year-over-year, marking the longest decline since 2009.
Food prices, especially pork prices, were a big drag.
“Currently lower core CPI inflation reflects slowing domestic demand due to ongoing asset declines and a tight labor market,” Goldman Sachs analysts said on Friday.
Ex-factory prices also fell. The producer price index fell 2.7% in December from the same period in 2022, marking the 15th straight month of decline. In 2023, PPI decreased by 0.3%.
Looking ahead, analysts in Capital Economics expect core inflation to pick up slightly, helped by the cyclical recovery in the Chinese economy. But deflationary pressures will not go away.
“Weak global growth and continued overinvestment in China mean deflationary risks to its economy will continue for some time to come,” analysts at Capital Economics said on Friday.
However, there was some positive news in Friday's data. In December, exports rose 2.3% from the same month a year ago, marking the second straight month of growth and a slight improvement in global appetite for Chinese goods. The country's exports fell for six straight months before November.
At $240 billion, trade with Russia reached a new record high in 2023, up 26% from the previous year. Overall, this accounts for 4% of China's total trade.
In 2023, the US was China's largest single-country trading partner, accounting for 11.2% of total trade. However, it points to a drop in 2022 — the first drop since 2019, when Washington and Beijing were in the middle of a protracted trade war.
BYD electric cars wait to be loaded onto a ship at the international container terminal of Taicang Port, located in China's eastern Jiangsu Province.
ASEAN, the 10-member Association of Southeast Asian Nations and the European Union account for 15.4% and 13.2% of total trade with China, Chinese customs figures show.
The country recorded a surge of 69% in the total value of automobile exports last year, the highest among all categories.
In terms of volume, China is expected to ship 5.22 million vehicles in 2023, up 57% from 2022. That's thanks in part to the development of electric vehicles, Liu said.
“One out of every three cars that China exports is an electric passenger vehicle,” he told a press conference.
“Looking to the future, we believe that China's automotive industry still has a strong comprehensive competitive advantage and can continue to provide more and better innovative products to meet the needs of global consumers,” he added.
Earlier this week, a major Chinese car industry conglomerate said The country is “certain” to overtake Japan as the world's biggest car exporter last year thanks to strong demand from Russia and a global appetite for EVs.
The ranking will be confirmed once Japan's official annual statistics are released, expected in the next few weeks.