Despite US tariffs, China's export in the US breaks record
October 12, 2018 02:30 PM NPT
CHINA, Oct 12: China's vast export engine unexpectedly kicked into higher gear in September, producing a record trade surplus with the United States that could exacerbate the already-heated dispute between Beijing and Washington.
Analysts said last month's strong export growth - which might indicate US tariffs are not biting much yet - is unlikely to be sustained.
But the robust numbers reported on Friday by China's customs agency - the last ones from China before US congressional elections on November 6 - could prompt a reaction from US President Donald Trump.
September exports rose 14.5pc from a year earlier, the fastest pace since February, the customs data showed. That was well above August's 9.8pc and a Reuters poll forecast of 8.9pc.
"The big picture is the Chinese exports have so far held up well in the face of escalating trade tensions and cooling global growth, most likely thanks to the competitiveness boost provided by a weaker renminbi," said Julian Evans-Pritchard, senior China economist at Capital Economics.
"With global growth likely to cool further in the coming quarters and US tariffs set to become more punishing, the recent resilience of exports is unlikely to be sustained."
A weaker yuan, which has depreciated about 6pc against the dollar this year, may have taken the sting out of the tariffs imposed on $250bn of exports to the United States.
Despite concerns from some officials about the yuan's depreciation, US Treasury staff have not recommended labelling China as a currency manipulator in a coming report on foreign exchange rate practices, according to media reports on Thursday.
China's politically-sensitive surplus with the US was $34.13bn in September, surpassing the record of $31.05bn in August.
Beijing's export data has been surprisingly resilient to tariffs, possibly because companies ramped up shipments before broader and stiffer US duties went into effect, raising concerns about a sharper drop in export strength once all tariffs kick in.
"The front-loading impact is quite obvious to me," said Betty Wang, senior China economist at ANZ in Hong Kong.
She cited a jump in exports of electrical machinery - the biggest export item from China to the US - as a sign exporters might have pushed out shipments ahead of implementation of the latest tariffs on $200bn in Chinese exports.
Along with electrical machinery, exports for textiles, furniture and chips all rose faster than in the previous month, the customs data showed.
"If that’s the case then I think further downside risk can be expected in the fourth quarter," Wang said.
Li Kuiwen, a spokesman from the country's customs agency, also told reporters trade growth may slow somewhat in the fourth quarter.
The world's two biggest economies last slapped tit-for-tat tariffs on each other's goods on September 24. There is no specific date set for the next round of tariffs, even as Trump has made repeated threats to impose them on virtually all Chinese goods.
China's exports to the US continued to rise at a double- digit clip in September compared with a year earlier, while imports fell for the first time since February.
Over the first nine months of the year, China's surplus with its largest export market totalled $225.79bn, compared with about $196.01bn in the same period last year.
Growth in overall imports for September instead showed a moderate slowdown, in line with signs the broad cooling in domestic demand.
Imports rose 14.3pc in September, versus a 19.9pc gain in August, slightly missing analysts' forecast of a 15pc growth.
Iron ore imports rose to their highest level in four months as steel mills ramped up output ahead of winter production restrictions.
For trade with all countries, China logged a surplus of $31.69bn for September, compared with forecasts in a Reuters poll for $19.4bn and August's surplus of $27.89bn.
China's economy is feeling some heat from tariff dispute and signs of slowing that prompted the central bank on Sunday to loosen policy by cutting banks' reserve requirement ratio (RRR) for a fourth time this year.
Growth in China's factory sector in September stalled after 15 months of expansion, with export orders falling the most in more than two years, a private business survey showed. An official survey also confirmed a further manufacturing weakening.
To shore up growth, Beijing has pledged to increase export tax rebates from November 1 for the second time this year and promised to cut corporate burden on a larger scale to help struggling Chinese firms.
The International Monetary Fund on Tuesday cut its global economic growth forecasts for this year and next, saying that the US-China trade war was taking a toll. It also slashed China's growth forecast for next year to 6.2pc from 6.4pc.
China will cut import tariffs on a wide range of goods beginning on November 1, as part of Beijing's pledge to take steps to increase imports this year amid rising tension.