A knock for China’s ex­port en­gine

Weak global de­mand in 2016

The Star Early Edition - - BUSINESS REPORT INTERNATIONAL - Elias Glenn and Sue-Lin Wong

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.

Big­gest vic­tim

“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.

Re­tal­i­a­tion

“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.

PHOTO: AP

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.

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