The pace of China’s import growth is set to slow in 2018 after a boom this year.
Inbound shipments will expand just 5 percent in 2018 after surging 14.9 percent this year, according to a Bloomberg survey of economists. Slower infrastructure investment, tighter monetary policy, weaker commodity inflation and high base effects are likely growth drags.
That’s unwelcome news for major commodity exporters from Brazil to Australia as well as key links in the manufacturing powerhouse’s Asian supply chain, from South Korea to Taiwan and Malaysia. China’s 17.3 percent increase in imports for the first 11 months from a year earlier has boosted global trade, a tailwind now set to ease.
“The expected moderation in growth of Chinese imports in 2018 is likely to be reflected in slower export growth from other Asian nations,” said Rajiv Biswas, chief Asia-Pacific economist at IHS Markit in Singapore. “Commodities, refined oil products and electronics will be particularly affected.”
The drag comes despite a buoyant outlook for the world economy and trade in 2018. The International Monetary Fund projects the global economy will grow 3.6 percent this year and 3.7 percent next year. World trade growth of 2.4 percent last year will pick up to about 4 percent this year and remain at that level “into the medium term,” the fund said in October.
With many Asian nations’ exports geared toward China, global economic and trade strength is unlikely to be able to completely offset the drag from an import slowdown in the world’s second-largest economy, says Louis Kuijs, chief Asia economist in Hong Kong at Oxford Economics and a former IMF and World Bank economist. China International Capital Corp. estimates South Korea, Japan and Taiwan account for 28 percent of China’s total imports.
China’s recently announced plan to slash import taxes on a wide range of consumer goods may help at the margin but won’t materially change the outlook for a slowdown, says Kuijs.
Malaysia’s export growth pace will slow by more than half to 3.7 percent next year, while Taiwan’s will decrease to 5.7 percent and Singapore’s will edge down to 3.9 percent, Goldman Sachs Group Inc. analysts led by Goohoon Kwon estimate.
Several factors are expected to weigh on imports. Policy makers’ determination to rein in borrowing, eliminate wasteful spending, and reduce financial risk are key factors in those headwinds. Economists surveyed by Bloomberg see economic growth easing to 6.5 percent in 2018 from an estimated 6.8 percent this year.
Infrastructure investment growth is forecast to slow to 12 percent next year from almost 20 percent in the first 10 months of this year. That means using less concrete and steel than in prior years, which indicates commodity exporters may have a more challenging 2018, says Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc in Hong Kong.
Import growth has been surprisingly strong on robust domestic demand. Inbound shipments climbed 17.7 percent from a year earlier in November, the customs administration said Friday. Exports increased 12.3 percent. Both readings exceeded economist estimates.
“We are skeptical that the strength of imports can be sustained, given that the delayed impact of policy tightening and a cooling property market are set to weigh on Chinese demand for commodities in coming quarters,” said Julian Evans-Pritchard, a China economist at Capital Economics Ltd. in Singapore.
China’s still likely to overtake the U.S. as the largest importer in five years, CICC economists Liu Liu and Liang Hong wrote in a recent note. They project the Asian country will import more consumer-related products than industrial material as it becomes the world’s largest consumer market in coming years.
Neumann sees a silver lining for some Asian nations. While a cooling construction boom will cause import growth to decelerate sharply next year, he says, a big push into new industries may help some exporters from advanced nations including Japan, South Korea and Germany.
“The trend is already visible, with exports from developed markets by some measures outperforming emerging markets in the recent past,” he said. “China, in short, will deliver a decisive growth impulse more to developed markets in 2018 than emerging ones, which have benefited from the country’s construction boom in the past.”