With President Trump imposing tariffs on Chinese products, market experts were expecting Chinese export figures to show a decline in October. But to their surprise, the official customs data actually showed a rise in exports to the U.S.
The value of China’s exports to the United States was pegged at US$42.7 billion in October 2018, showing a 13.3 percent increase from the same period last year. When compared to September 2018, exports had risen by about 13 percent.
However, in what is good news for the U.S., China’s trade surplus with the United States reduced to US$31.8 billion in October from US$34.1 billion the previous month. This is largely due to a jump in U.S. exports. The United States shipped US$10.9 billion worth of goods to the Chinese market in October.
While some were confused as to why Chinese exports rose in October despite U.S. tariffs, market analysts soon found out that traders were rushing to export as much product as possible before Trump imposes a fresh set of tariffs on January 2019. The 10 percent U.S. tariff on US$200 billion worth of Chinese products is expected to be increased to 25 percent.
Even though President Xi and President Trump are planning to meet in Argentina later this month, most traders are pessimistic on any trade deal and are shipping out products in huge numbers. “We expect this front-loading behavior to continue for the rest of 2018… Strong export growth may not last very long. We are not particularly optimistic on China export growth in 2019,” Iris Pang, ING economist, said in a report. (ABC News)
A slowing Chinese economy
Despite strong exports in October, retail sales have been underperforming of late. As per data released by the National Bureau of Statistics (NBS), retail sales increased by just 8.6 percent in October compared to a year earlier. This is the slowest retail sales growth since May this year.
“Policy measures, including funding support for private firms, need some time to show results. GDP growth in the fourth quarter could dip below 6.5 percent,” Wang Jun, a Beijing-based chief economist at Zhongyuan Bank, said to The Epoch Times.
The country’s financial system also seems to be under stress as fiscal revenues decreased by 3.1 percent in October compared to last year. This is the first such fall this year. And though Beijing has implemented monetary policies like reducing the reserve requirement ratios for banks, their impact has been minimal.
“The effectiveness of China’s monetary policy is waning and money has not flowed into the real economy… China should be wary of falling into a kind of liquidity trap [referring to a situation when monetary policy easing becomes useless in generating economic activity]… Off-balance financing has been shrinking… now the space of monetary policy has become very limited. It is necessary to implement fiscal measures such as tax cuts,” Shen Jianguang, Chief Economist at JD Finance, said to South China Morning Post.
Growth in garment sales is the slowest in more than two years. Car sales have also been disappointing with the industry literally on the verge of declaring its first annual contraction since 1990. Increased spending on mortgage debt and a fall in investment returns are said to have caused the slump in consumer spending.