Slumping trade adds pressure for China-US settlement
China’s foreign trade slumped at the end of last year, setting a grim domestic backdrop for the nation’s negotiators as they seek a deal to end the stand-off with the Trump administration.
Exports in dollar terms fell 4.4 per cent from a year earlier, while imports dropped 7.6 per cent. Both were the worst result since likely increase the pressure on China to achieve a deal, or at least a suspension of the US tariff hikes,” said Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong. “At the same time, the US side also seems to be under more pressure to de-escalate tension in terms of news on the economy and financial markets than a few months ago.”
Stocks fell with the Australian dollar after the data were released, with losses in Asian equities most pronounced in Hong Kong. Futures pointed to lower open for sessions in Europe and the US amid signs January’s rally in risk assets is abating.
Chinese shipments are already under pressure from slowing demand from top trade partners-Europe’s recovery is under question, with Germany triggering recession fears, Japan facing a tougher 2019 and the US itself forecast to see waning growth after a robust 2018.
China’s exports to the US, European Union, Hong Kong, Japan and Taiwan all fell from a year earlier.
“There is a clear downward trend," said Zhou Hao, an economist with Commerzbank in Singapore who was among the few to accurately forecast a December contraction in exports. "This is not just due to the trade war and tariffs. On top of those, the major drag is slowing global demand."
While China is no longer as dependent on trade, as the world’s largest exporter, factory output, profits and employment still hinge on demand from overseas. Its domestic appetite also affects production by commodity and machinery exporters around the world.
Stabilizing trade is one of the goals the leadership set for 2019, on top of supporting employment, investment and the finance sector.