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China’s exports suffers biggest decline in 2 years

China‘s huge export industry suffered its worst month in two years but still managed to rack up a record trade surplus with the United States in 2018 despite new tariffs.

The value of goods shipped from China to the rest of the world fell by more than 4% in December, compared to the same period a year ago, Chinese government data published on Monday showed.

That represents the worst monthly performance for China’s export sector in more than two years, and the first year-on-year decline since March 2018. Economists polled by Reuters had forecast that exports from China would rise slightly in December.

Despite last month’s gloom, China for the second year running racked up a record trade surplus with the United States in 2018, according to Chinese data.

The $323 billion (RM1.32 trillion) gap in value between how much China sells to the United States and how much it buys from it has been at the heart of the trade dispute. President Donald Trump has previously said that trade with China is unfair.

The United States had an even larger estimate of that gap, with the latest figures from the census bureau showing a $345 billion  (RM1.41 trillion) trade deficit with China in 2018.

 

Optimism Over Trade

US tariffs on $200 billion (RM820 billion) worth of Chinese goods kicked in during September, but until now appeared to be having little impact on exports which have continued to increase in recent months. Analysts have said this was because American importers were rushing through purchases of Chinese goods in order to beat an anticipated rise in tariffs in January.

But that surge has now faded, and could dip further following a recent agreement between Trump and Chinese leader Xi Jinping to temporarily suspend further tariff hikes.

“In the months ahead we are likely to see some payback of the earlier strength in exports,” said Raymond Yeung, an economist at investment bank ANZ.

 

Optimism that the world’s two biggest economies can strike a deal on trade has risen since talks in Beijing finished last week. The 90-day period set by the United States and China to agree to trade terms expires in March, when the threat of new tariffs will come into play.

 

“It is now more likely than before that a deal emerges eventually that would mean a more lasting suspension of new tariffs,” Louis Kuijs, head of Asia economics at research firm Oxford Economics, said in a note on Monday.

 

Not just tariffs

China’s economy has more to worry about than the trade war. Exports to countries other than the United States also slowed, which experts said was down to weaker demand because of a cooling global economy.

“Tariffs can’t take all of the blame,” Julian Evans-Pritchard, senior China economist at research firm Capital Economics, said in a note on Monday.

 

Signs of stress in the Chinese economy are multiplying. Growth fell to its lowest level since the 2008 financial crisis in the quarter ended September, while other indicators such as industrial profits and inflation have been flashing red in recent weeks.

 

Despite the disappointing December numbers, 2018 was actually a pretty good year for Chinese exporters. For the entire year, overseas sales of Chinese goods rose 10% in US dollar terms compared to 2017 — their quickest rate of growth in seven years.

 

Things are unlikely to be so good this year even if the United States and China can strike a deal on trade, with experts predicting an acceleration in the global growth slowdown.

 

“Exports will remain weak even if China can clinch a trade deal that rows back Trump’s tariffs,” said Evans-Pritchard.

 

 

 

 

 

– CNN

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