China’s Dec ex­ports in sur­prise fall

Trade sur­plus with US jumps to record high


BEI­JING: China’s ex­ports un­ex­pect­edly fell the most in two years in De­cem­ber, while im­ports also con­tracted, point­ing to fur­ther weak­ness in the world’s sec­ond-largest econ­omy in 2019 and de­te­ri­o­rat­ing global de­mand. Adding to pol­i­cy­mak­ers’ wor­ries, data yes­ter­day also showed China posted its big­gest trade sur­plus with the United States on record in 2018, which could prompt Pres­i­dent Don­ald Trump to turn up the heat on Bei­jing in their bit­ter trade dis­pute. The dis­mal De­cem­ber trade read­ings sug­gest China’s econ­omy may have cooled faster than ex­pected late in the year, de­spite a slew of growth­boost­ing mea­sures in re­cent months rang­ing from higher in­fra­struc­ture spend­ing to tax cuts. Some an­a­lysts has al­ready spec­u­lated that Bei­jing may have to speed up and in­ten­sify its pol­icy eas­ing and stim­u­lus mea­sures this year after fac­tory ac­tiv­ity shrank in De­cem­ber. China’s De­cem­ber ex­ports un­ex­pect­edly fell 4.4% from a year ear­lier, with de­mand in most of its ma­jor mar­kets weak­en­ing. Im­ports also saw a shock drop, fall­ing 7.6% in their big­gest de­cline since July 2016. An­a­lysts had ex­pected ex­port growth to slow to 3% with im­ports up 5%. “The data re­flect an end to ex­port front-load­ing and the start of pay­back ef­fects, while the global slow­down could also weigh on China’s ex­ports,” No­mura econ­o­mists wrote in a note, re­fer­ring to a surge in ship­ments to the US over much of last year as com­pa­nies rushed to beat fur­ther tar­iffs. “The ex­port growth print also sug­gests that the re­cent strength of the yuan might be short-lived; Bei­jing will per­haps be more ea­ger to strike a trade deal with the US; and that pol­i­cy­mak­ers will need to take more ag­gres­sive mea­sures to sta­bilise GDP growth.” China’s po­lit­i­cally-sen­si­tive sur­plus with the US widened by 17.2% to $323.32 bil­lion last year, the high­est on record go­ing back to 2006, ac­cord­ing to Reuters cal­cu­la­tions based on cus­toms data. China’s large trade sur­plus with the United States has long been a sore point with Wash­ing­ton, which has de­manded Bei­jing take steps to sharply re­duce it. Wash­ing­ton im­posed im­port tar­iffs on hun­dreds of bil­lions of dol­lars of Chi­nese goods last year and has threat­ened fur­ther ac­tion if Bei­jing does not change its prac­tices on is­sues rang­ing from in­dus­trial sub­si­dies to in­tel­lec­tual prop­erty. China has re­tal­i­ated with tar­iffs of its own. How­ever, Bei­jing’s ex­port data had been sur­pris­ingly re­silient to tar­iffs for much of 2018, pos­si­bly be­cause com­pa­nies ramped up ship­ments be­fore broader and stiffer US du­ties went into ef­fect. As many mar­ket watch­ers pre­dicted, that boost has faded in the last few months. China ex­ports to the US de­clined 3.5% in De­cem­ber while its im­ports from the US were down 35.8% for the month. China’s to­tal global ex­ports rose 9.9% in 2018, its strong­est per­for­mance in seven years, while im­ports in­creased 15.8%. But De­cem­ber’s gloomy data, along with sev­eral months of fall­ing fac­tory orders, sug­gest a fur­ther weak­en­ing in its ex­ports in the near term. “A trade re­ces­sion is likely, i n our view,” Ray­mond Ye­ung, chief econ­o­mist at ANZ, said in a note, pre­dict­ing a pe­riod of ex­port con­trac­tion sim­i­lar to 2015-16. “The global elec­tron­ics cy­cle re­mains the key driver of Chi­nese ex­ports. A po­ten­tial down­turn in the sec­tor poses the real risk to China’s ex­ter­nal out­look even if China and the US reach a res­o­lu­tion on their trade dis­pute.” ING said a fall in elec­tronic ship­ments could be re­lated to for­eign com­pa­nies avoid­ing us­ing China-made elec­tronic com­po­nents, adding that ex­ports and im­ports of elec­tronic parts and goods will likely shrink this year. The higher tar­iffs China levied on US sup­plies also hit over­all im­port growth. For all of 2018, soy­beans, the sec­ond largest im­ports from the US, fell for the first time since 2011. Even if Wash­ing­ton and Bei­jing reach a trade deal in their cur­rent round of talks, it would be no panacea for China’s slow­ing econ­omy, an­a­lysts say. “The im­port slow­down is con­sis­tent with other signs that growth in China’s do­mes­tic econ­omy con­tin­ued to weaken,” said Louis Kuijs, head of Asia eco­nomics at Ox­ford Eco­nomics. “Over­all eco­nomic growth slowed fur­ther in the fourth quar­ter and re­mains un­der pres­sure from weaker ex­ports, slow credit growth and cool­ing real es­tate ac­tiv­ity.” Chi­nese pol­i­cy­mak­ers are widely ex­pected to roll out more sup­port mea­sures in com­ing months if do­mes­tic and ex­ter­nal con­di­tions con­tinue to de­te­ri­o­rate. Early this month, the cen­tral bank said it would slash banks’ re­serve re­quire­ments — the fifth such cut in a year — as it tries to en­cour­age more lend­ing and re­duce the risk of a sharp slow­down. A few an­a­lysts be­lieve in­ter­est rate cuts are a pos­si­bil­ity, but most ex­pect Bei­jing will re­frain from mas­sive stim­u­lus mea­sures like those de­ployed in the past, due to wor­ries that it could add to a moun­tain of debt and weaken the yuan.


MG cars for ex­port wait to be loaded onto a roll-on/roll-off ship at a port in Lianyun­gang, Jiangsu prov­ince on Sat­ur­day.

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