China’s exports top forecasts, but imports disappoint amid weak domestic demand

BEIJING - China’s exports grew at their fastest pace in nearly 1½ years in August, suggesting manufacturers are rushing out orders ahead of tariffs expected from a growing number of trade partners, while imports missed forecasts amid weak domestic demand.

Outbound shipments from the world’s second-largest economy grew 8.7 per cent year on year in value in August, Customs data showed on Sept 10, beating a forecast of a 6.5 per cent rise in a Reuters poll of economists and a gain of 7 per cent in July.

But imports increased by just 0.5 per cent, missing expectations for a 2 per cent boost and down from the 7.2 per cent growth a month prior.

The data showed exports remain a bright spot and a key driver for the world’s second-largest economy, which has struggled to regain momentum as a prolonged property slump and a sluggish labour market have severely dented consumer confidence.

“The strong export performance and trade surplus is favourable to economic growth in the third quarter and whole year,” said China Everbright Bank macroeconomic researcher Zhou Maohua.

“However, the global economic and geopolitical environment is complicated, and China’s exports face a lot of headwinds,” Mr Zhou added.

Economists have warned that Beijing risks undershooting its growth target if it becomes too reliant on exports, following a series of recent lacklustre data, raising pressure on policymakers for more stimulus to revive China’s economy.

August marked the sixth consecutive month of contraction in manufacturing activity, with producers reporting that factory gate prices were at their worst in 14 months, which suggests that firms are slashing prices to find buyers overseas.

Moreover, mounting trade barriers are emerging as another significant obstacle, threatening China’s price-driven export momentum.

Beijing’s efforts to negotiate with the European Union to ease tariffs on Chinese electric vehicles (EV) have made little headway.

And Canada in August announced a 100 per cent tariff on Chinese EVs, along with a 25 per cent tariff on Chinese steel and aluminium.

As China attempts to pivot and direct more exports to South-east Asia, it is also facing pushback there.

India is planning to raise tariffs on Chinese steel, Indonesia is eyeing heavy duties on textile imports, and Malaysia opened anti-dumping investigations into plastic imports from China and Indonesia.

Still, some analysts expect outbound shipments to ride out the storm, given the relative inexpensiveness of China’s yuan and the relative ease with which exporters can re-route their wares to avoid the tariffs.

“Outbound shipments are likely to remain strong in the coming months. Admittedly, more barriers are being erected,” said Ms Huang Zichun, China economist at Capital Economics.

“We doubt the tariffs announced so far will prevent real effective exchange rate declines from fuelling further gains in China’s global export market share,” she added.
REUTERS