A knock for China’s export engine
Weak global demand in 2016
CHINA’S massive export engine sputtered for the second year in a row in 2016, with shipments falling in the face of persistently weak global demand and officials voicing fears of a trade war with the US that is clouding the outlook for 2017.
In one week, China’s leaders will see if President-elect Donald Trump makes good on a campaign pledge to brand Beijing a currency manipulator on his first day in office, and starts to follow up on a threat to slap high tariffs on Chinese goods.
Even if the Trump administration takes no concrete action immediately, analysts say the spectre of deteriorating US-China trade and political ties is likely to weigh on the confidence of exporters and investors worldwide.
The world’s largest trading nation posted gloomy data on Friday, with 2016 exports falling 7.7 percent and imports down 5.5 percent. The export drop was the second annual decline in a row and the worst since the depths of the global crisis in 2009.
It will be tough for foreign trade to improve this year, especially if the inauguration of Trump and other major political changes limit the growth of China’s exports due to greater protectionist measures, the country’s customs agency said on Friday.
“The trend of anti-globalisation is becoming increasingly evident, and China is the biggest victim of this trend,” customs spokesman Huang Songping said. “We will pay close attention to foreign trade policy after Trump is inaugurated president,” he said. Trump will be sworn in on Friday.
China’s trade surplus with the US was $366 billion (R4.93 trillion) in 2015, according to US customs data, which Trump could seize on in a bid to bring Beijing to the negotiating table to press for concessions, economists at Bank of America Merrill Lynch said in a recent research note.
A sustained trade surplus of more than $20bn against the US is one of three criteria used by the US Treasury to designate another country as a currency manipulator.
China is likely to point out that its own data showed the surplus fell to $250.79bn in 2016 from $260.91bn in 2015, but that may get short shrift in Washington.
“Our worry is that Trump’s stance towards China’s trade could bring about long-term structural weakness in China’s exports,” economists at ANZ said. “Trump’s trade policy will likely motivate US businesses to move their manufacturing facilities away from China, although the latter’s efforts in promoting high-end manufacturing may offset part of the loss.” On Wednesday, China may have set off a warning shot to the Trump administration. Beijing announced even higher anti-dumping duties on imports of certain animal feed from the US than it proposed last year.
“Instead of caving in and trying to prepare voluntary export restraints like Japan did with their car exports back in the 1980s, we believe China would start by strongly protesting against the labelling with the IMF, but not to initiate more aggressive retaliation… immediately,” the Bank-of-America Merrill Lynch Global Research report said.
“That said, even a ‘war of words’ could weaken investor confidence not only in the US and China, but globally.”
China’s December exports fell by a more-than-expected 6.1 percent on-year, while imports beat forecasts slightly, growing 3.1 percent on its strong demand for commodities which has helped buoy global resources prices.
Trucks line up at a container port in Qingdao in east China’s Shandong province. China’s exports grew in November for the first time in nine months while imports also rose in a sign global and domestic demand are recovering.