By Ellen Zhang, Joe Cash and Ethan Wang

BEIJING (Reuters) – China’s exports gained momentum in December, with imports also showing recovery. The strength at year-end was partly fueled by factories rushing inventory overseas due to heightened trade risks under a Trump presidency.

Exports are a vital growth engine for China’s $18 trillion economy, which is still reeling from a prolonged property crisis and shaky consumer confidence. While policymakers find comfort in recent policy measures to keep the economy on track for an “around 5%” growth target, potential U.S. tariff hikes cloud the outlook for 2025.

U.S. President-elect Donald Trump has proposed hefty tariffs on Chinese goods, raising fears of a renewed trade war. Additionally, unresolved disputes with the European Union over tariffs on Chinese electric vehicles threaten China’s ambitions to expand auto exports and address deflationary overcapacity.

“Trade front-loading became more visible in December due to both Chinese New Year effects and Donald Trump’s inauguration,” said Xu Tianchen, senior economist at the Economist Intelligence Unit. China’s biggest festival runs from January 28 to February 4.

Import growth could stem from stockpiling commodities like copper and iron ore as part of China’s ‘buy low’ strategy.

Outbound shipments in December rose 10.7% year-on-year, customs data showed, surpassing the 7.3% growth forecasted by economists and improving from November’s 6.7% increase. Imports rose unexpectedly by 1.0%, the strongest performance since July 2024. Economists had anticipated a 1.5% decline.

China’s trade surplus grew to $104.8 billion in December, up from $97.4 billion in November, while the trade surplus with the U.S. widened to $33.5 billion from $29.81 billion.

A Chinese customs spokesperson indicated there remains “huge” room for China’s imports to grow this year. Chinese manufacturers, buoyed by a weakening yuan, found international buyers to offset domestic demand by reducing prices. Consequently, China’s exports grew by 5.9% in 2024, while imports only increased by 1.1%.

The double-digit rise in December exports (led by the U.S. and ASEAN) and increased PMI new export orders support the notion that tariffs could influence export patterns in the next few quarters, potentially boosting shipments before new tariffs are enacted.

Market reactions to the trade data were muted, with the yuan hovering near 16-month lows against the dollar. Key share indexes were also down.

SIGNS OF RECOVERY

Signs of stabilization have emerged following China’s recent stimulus push. Factory activity has remained in modest expansion for three consecutive months, while services and construction rebounded in December, an official survey indicated.

South Korea, a significant indicator of China’s imports, reported an 8.6% increase in shipments to China in December, suggesting resilience in demand for technology products.

China’s iron ore imports rose for a second consecutive year in 2024, reaching a new peak as lower prices boosted buying, despite ongoing challenges from the property crisis impacting steel demand.

The world’s largest agricultural importer also purchased a record amount of soybeans last year, as buyers rushed to secure U.S. soybeans ahead of Trump’s inauguration amid U.S.-China trade tensions.

However, crude oil imports fell last year, marking the first annual decline in two decades (excluding declines from the COVID-19 pandemic) due to lukewarm economic growth and peaking fuel consumption.

China’s leaders have pledged to loosen monetary policy and adopt a more proactive fiscal policy in 2025 to offset external pressures and revitalize domestic demand, with a growth target of around 5% for the year, a challenging goal for 2024.