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O 112325Z JAN 10
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7559
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UNCLAS BEIJING 000053 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR 
DEPT OF COMMERCE FOR IRA KASOFF, NICOLE MELCHER (5130, MAC (4420) 
TREASURY FOR OASIA/DOHNER/WINSHIP 
GENEVA PASS USTR 
NSC FOR JLOI, DBELL 
 
E.O. 12958:  N/A 
TAGS: ETRD EIND CH
SUBJECT: China Export Growth Startles 
 
¶1. (SBU) Summary:  China's December trade numbers came in much 
higher than forecast, with a 17.7 percent increase in December 
year-on-year (yoy).  Imports grew even faster, increasing 55.9 
percent in December year-on-year.  While the data beat all 
forecasts, the large increases are in part due to the low base 
comparison with the unusually weak trade numbers a year ago. 
Analysts believe the rebound in China's trade, however, will 
continue well into 2010.  At the same time, China's media is 
predicting that China's trade growth last month will put it ahead of 
Germany as the world's top exporter for the first time.  End 
summary. 
 
¶2. (SBU) December trade data released January 10 by China's Customs 
Administration showed much higher than forecast increases in export 
figures for the month and a slight drop in China's global trade 
surplus to USD 18.4 billion from 19.1 billion in November.  Export 
growth rebounded to 17.7 percent yoy in December (solidly beating a 
representative Goldman Sachs forecast of 6.0 percent, and rising an 
impressive 23 percent over November levels).  Key contributing 
factors include recovery in external demand, the low base effect of 
2008's global financial crisis, and the fall in the RMB's effective 
exchange rate (thanks to the informal peg to a depreciating US 
dollar).  The gain in exports was broadly based across major 
markets: up 10.2 percent over the previous month to the U.S.; up 
10.7 percent to the EU; up 15.4 percent to ASEAN.  Sectorally 
speaking, exports of mechanical and electrical products (which made 
up 59 percent of total exports) rose 13.4 percent in December mom/sa 
(month-on-month/seasonally adjusted); high-tech exports were up 11.1 
percent; low-end consumer goods were up a lower 7.7 percent mom/sa; 
clothing rose 7.5 percent mom/sa; toys climbed a paltry 3.7 percent. 
 
 
¶3. (SBU) Imports growth also rose sharply to 55.9 percent yoy in 
December (a record high, up from 26.7 percent in November.) 
Analysts attribute the strong growth in imports to: strong exports 
(a large part of China's imports are inputs for future exports); 
rising import prices; and continued strength in domestic demand for 
commodities and mechanical equipment for infrastructure projects and 
property construction.  Sectoral breakdowns show imports of crude 
oil rose a hefty 24.1 percent in December month-on-month (seasonally 
adjusted) and mechanical and electrical products were up 6.7 percent 
month-on-month.  Interestingly, imports of several industrial metals 
showed slowing gains or outright declines in December. 
 
¶4. (SBU) Looking at 2009 as a whole, Customs data show Chinese 
exports for the year totaled USD 1.2 trillion (down 16 percent yoy). 
 Imports for the year were down 11 percent. The trade surplus, as 
calculated by the PRC, decreased by 34 percent to USD 196 billion. 
The standing of key trading partners remained unchanged with 
China-EU trade volume still at the top, U.S. total trade volumes 
second, and Japan third.  (Exports to the U.S. totaled USD 220.8 
billion, a 12.5 percent decrease over 2008, and imports were USD 
77.4 billion, a 4.8 percent drop from 2008.)  Chinese media are 
making much of the expectation that December's unexpectedly strong 
export figures will push the PRC ahead of Germany as the world's 
largest exporter. 
 
¶5. (SBU) A broad array of analysts expect solid recovery in China's 
exports to continue in early 2010, though not at December's torrid 
pace. Even the unexpectedly good numbers did not stop Zhang 
Yansheng, Director of Institute of Foreign Trade of the National 
Development and Reform Commission, from telling China Daily that 
export "quality" needs improvement, since a "big proportion of 
(China's) exports are low value-added."  Other Chinese experts have 
sounded a similar off-note, noting that by measure of technological 
innovation and industry competitiveness China's status as a trade 
power remains limited. 
 
 
HUNTSMAN