China reported a sharp drop in exports for December sending stock markets across Asia lower, as a global slowdown and a punishing trade war with the US hit the world’s second-largest economy.  The 4.4 percent fall in December exports came as China reported an annual trade surplus with the US of $323bn, the highest since at least 2006 according to Reuters data, as exporters rushed to ship orders ahead of a threat of rising tariffs. A 7.6 per cent monthly import decline in December underlined how growth was slowing in China, due to weakening investment and consumption following Beijing’s drive to reduce debt in the economy.

Car sales in China, the world’s largest car market, also declined last year for the first time since 1990, official figures showed on Monday, adding to fears that consumers are reducing spending. A growing bilateral surplus complicates trade negotiations between Beijing and Washington, with the US pushing China to commit to large purchases of American agricultural and energy commodities in order to reduce the gap.  President Xi Jinping’s administration has signalled its willingness to do so in order to reach a possible trade truce by March 1 but a deal could still falter over US demands for wide-ranging structural changes to China’s economy.

The December trade contraction confounded expectations, hitting Asian markets. Companies listed on Hong Kong’s Hang Seng index closed down 1.38 per cent on Monday, while shares listed in Shanghai and Shenzhen fell 0.87 per cent. The offshore renminbi was also weaker by 0.10 per cent in late afternoon, at Rmb6.7665 against the US dollar. China’s overall trade figures for last year were relatively robust, with exports up 10 per cent over 2017 and imports up almost 16 per cent year on year. In a sign of belated impact from the trade war, monthly exports to the US fell 3.5 per cent in December, while imports of US goods plummeted 36 per cent as China largely stopped buying American soyabeans and other commodities. Analysts said slower global growth was to blame for the sluggish December trade figures.

Exports to other markets, including Japan and the EU, also shrunk while shipments to Hong Kong, a centre for re-exports of Chinese goods, fell 26 per cent. “[US] tariffs can’t take all of the blame,” said Julian Evans-Pritchard, senior China economist at Capital Economics. “Exports to the rest of the world also slowed, with surveys pointing to weaker global demand at the end of 2018.”

Japan and Germany, two of China’s biggest export markets, reported third-quarter economic contractions. Weakening global demand for electronic products “poses the real risk to China’s external outlook even if China and the US reach a resolution on their trade dispute”, said Raymond Yeung, an economist at Australian Bank ANZ.