China’s import growth picked up slightly in November, rising to 1.9% YoY from 1.0% in October. However, this uptick was smaller than market expectations. Year-to-date, import growth has been negative at -0.6% YoY.
While we’ve seen strong tech-related imports, with hi-tech imports up 8.7% YoY ytd, most other import categories have been very weak. There are generally clear explanations. For example, the continued malaise in the property market resulted in a sharp drop of demand in related imports, with lumber (-15.5%) and steel (-11.7%) all steeply in negative territory.
One structural shift in China’s import structure is likely tied to the auto sector. As the domestic auto sector has seen increased dominance, this translated into a sharp -38.3% YoY ytd decline in auto imports. This trend could continue, especially as Chinese automakers improve competitiveness across a broader range of products.
China’s soft imports have raised concerns among trading partners, such as the EU. French President Emmanuel Macron has warned that the EU might hike tariffs on China if these imbalances are not addressed in the coming months. Such a timeline would likely be too aggressive to resolve this issue. China’s pivot to establishing domestic demand as a key driver of growth will take time, but it’s essential for China to move into the next phase in its economic development.
Ultimately, we need to see what concrete measures are put in place to boost domestic consumption next year. The 15th Five-Year Plan mentioned plans to increase win-win external cooperation and establish international consumption centres, both of which sound positive for addressing trade imbalances. How soon these measures come through could impact how trading partners react in the coming months and years.