- Both exports and imports fell by more than expected in the world’s second largest economy in September, with US tariffs causing serious issues for China’s trade
- US President Donald Trump said China agreed last week to resume buying US farm goods as part of a deal that will also delay a tariff increase set for Tuesday
China's exports fell for the second month in a row in September, as the trade war with the United States continued to hit the world's second-largest economy.
Shipments fell by 3.2 per cent during the month compared to a year earlier, after dropping 1.0 per cent in August in dollar terms. This was worse than the 2.8 per cent decline expected by analysts in a Bloomberg poll. It was also the biggest fall in exports since February, when they fell 20.7 per cent.
In addition, imports during the month fell by 8.5 per cent, well below the 6.0 per cent decline expected, showcasing weaker domestic demand. Imports have declined in every month this year apart from one - April.
The country posted a trade surplus of US$39.65 billion, above the US$34.83 billion recording in August, according to China's General Administration of Customs. The new data will have been affected by a 15 per cent tariff on roughly US$112 billion of Chinese goods applied by Washington on September 15.
China's exports to the US in August dropped 21.9 per cent to US$36.5 billion, from the 22 per cent decrease in August. Imports from the US, meanwhile, dropped by 20.5 per cent to US$10.5 billion.
Based on calculations by the South China Morning Post, China's exports fell by 0.79 per cent in the third quarter of 2019 compared to a year earlier. Imports fell by 6.49 per cent over the same period, highlighting the serious and persistent challenge faced by Beijing on this front.
The weak trade data comes days after negotiators from China and the US appeared to reach an interim trade agreement that would delay a planned tariff increase " expected to come into effect on Tuesday " on US$250 billion of Chinese goods from 25 per cent to 30 per cent.
China's exports fell in August under weight of US trade war
US President Donald Trump on Monday tweeted: "My deal with China is that they will IMMEDIATELY start buying very large quantities of our Agricultural Product, not wait until the deal is signed over the next 3 or 4 weeks. THEY HAVE ALREADY STARTED! Likewise financial services and other deal aspects, start preparing …"
However, more difficult American negotiating points " such as protection for intellectual property rights and Chinese government subsidises for favoured industries " were left for later negotiations.
Furthermore, there was no clarity on whether US tariffs due to take effect on December 15 " mainly targeting consumer goods such as smartphones, laptops and gaming consoles " would go ahead. For the time being, tariffs remain on some US$365 billion in Chinese imports, which will continue to put downward pressure on Chinese trade and the wider economy.
The second successive monthly decline in China's exports was on the back of an increase in July, which now seems like an anomaly driven by front-loading of goods to beat US tariffs implemented on September 1. American buyers of Chinese goods subject to the new tariffs were likely to have filled their inventories as much as possible before the goods became more expensive to import.
China's service sector growth slows to seven-month low in September
Furthermore, the much-reported 3.8 per cent depreciation of the yuan in August failed to stop the decline in exports " despite Washington's fears that it was being used to give China's exporters an unfair advantage. It also begs the question: how negative would China's trade data be had the People's Bank of China not allowed the yuan to weaken against the US dollar?
The weak export figures will put further pressure on China's already slowing economy. Third quarter gross domestic product (GDP) growth figures due on Friday are expected to show that the economy slowed to 6.1 per cent from 6.2 per cent in the second, according a Bloomberg survey of analysts.
Chinese growth has decelerated gradually over the past decade from the double-digit rates seen as recently as the first half of 2011. While the second quarter growth rate was the lowest since quarterly growth statistics were first published in the first quarter of 1992, it is still a relatively strong, three times that of the United States.
Analysts have been raising concerns about China's consumption levels for months, with retail sales underperforming and various bouts of government stimulus failing to kick-start purchases of big ticket items such as cars. Sluggish imports suggest government support has yet to trickle into the real economy.
The import slump also points to a downturn in the manufacturing sector, as many of China's imports are components ordered by factories for use in goods for export. In the most recent official manufacturing purchasing managers' index, a gauge of factory owners' sentiment, export orders remained in negative territory for the 15th month in a row.
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