China's exports shrink most in two years, raising risks for global economy

Imported vehicles are seen at a car dealership in Tianjin bonded zone, China January 2, 2019. — Reuters pic
Imported vehicles are seen at a car dealership in Tianjin bonded zone, 2, 2019. — Reuters pic

BEIJING, Jan 14 — China’s exports unexpectedly fell the most in two years in December and 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 today 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 cantankerous trade dispute.

Softening demand in China is already being felt around the world, with slowing sales of goods ranging from iPhones to automobiles prompting profit warnings from the likes of and Jaguar Land Rover.

The dismal December trade readings suggest China’s economy may have lost more momentum late in the year than earlier thought, despite a slew of growth boosting measures in recent months ranging from higher infrastructure spending to tax cuts.

Some analysts had already speculated that Beijing may have to speed up and intensify its policy easing and stimulus measures this year after activity shrank in December.

Exports in December unexpectedly fell 4.4 per cent from a year earlier, with demand in most of its major markets weakening. Imports also saw a shock drop, falling 7.6 per cent in their biggest decline since July 2016.

“Export growth dropped more than anticipated as softened and the drag from US tariffs intensified. Import growth also fell sharply in the face of cooling domestic demand. We expect both to remain weak in the coming quarters,” Capital Economics said in a note.

“Meanwhile, with policy easing unlikely to put a floor beneath domestic economic activity until the second half of this year, import growth is likely to remain subdued.”

Higher trade surplus with US

China’s politically-sensitive surplus with the US rose 17.2 pervcent to US$323.32 billion (RM1.323 trillion) last year, the highest on record going back to 2006, according to Reuters calculations based on customs data.

That compared with about US$275.81 billion in 2017.

China’s large trade surplus with the United States has long been a sore point with Washington, which has demaded Beijing should take steps to reduce it.

Washington imposed import tariffs on hundreds of billions of dollars of 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.

China’s total global exports rose 9.9 per cent in 2018, its strongest trade performance in seven years, while imports increased 15.8 per cent last year.

But December’s gloomy data seemed to suggest the US front-loading effect has tapered off, and after several months of falling factory orders a further weakening in China’s exports is widely expected in coming months.

Many US warehouses are already packed to the rafters with Chinese goods that American retailers rushed in ahead of higher tariffs.

China exports to the US declined 3.5 per cent in December while its imports from the US were down 35.8 per cent for the month.

Weak imports highlight weak demand outlook

The higher tariffs China levied on US supplies also hit the country’s overall import growth. For all of 2018, soybean, 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.

Sources told Reuters last week that Beijing is planning to lower its economic growth target to 6-6.5 per cent this year after an expected 6.6 per cent in 2018, the slowest pace in 28 years. — Reuters

Source: The Malay Mail Online

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