China’s trade surplus with US hits record as exporters rush to beat tariffs

Chinese exporters have being rushing through shipments before US tariffs come into effect. Above, containers at the Port of Shanghai. (Reuters)
Updated 13 July 2018
0

China’s trade surplus with US hits record as exporters rush to beat tariffs

  • Analysts expect less favorable trade balance for China in coming months as duties on exports start to bite
  • Washington has warned it may ultimately impose tariffs on more than $500 billion worth of Chinese goods

BEIJING: China’s trade surplus with the United States swelled to a record in June as its overall exports grew at a solid pace, a result that could further inflame a bitter trade dispute with Washington.
But signs exporters were rushing shipments before tariffs went into effect in the first week of July suggest the spike in the surplus was a one-off, with analysts expecting a less favorable trade balance for China in coming months as duties on exports start to bite.
The data came after the administration of US President Donald Trump raised the stakes in its trade row with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports, including numerous consumer items.
China’s trade surplus with the United States, which is at the center of the tariff tussle, widened to a record monthly high of $28.97 billion, up from $24.58 billion in May, according to Reuters calculations based on official data going back to 2008.
The record surplus “won’t help already sour relations and escalating tensions,” Jonas Short, head of the Beijing office at Everbright Sun Hung Kai, wrote in a note.
Trump, who has demanded Beijing cut the trade surplus, could use the latest result to further ratchet up pressure on China after both sides last week imposed tit-for-tat tariffs on $34 billion of each other’s goods. Washington has warned it may ultimately impose tariffs on more than $500 billion worth of Chinese goods — nearly the total amount of US imports from China last year.
The dispute has jolted global financial markets, raising worries a full-scale trade war could derail the world economy. Chinese stocks fell into bear market territory and the yuan currency has skidded, though there have been signs in recent days its central bank is moving to slow the currency’s declines.
China’s June exports rose 11.3 percent from a year earlier, China General Administration of Customs reported, beating forecasts for a 10 percent increase according to the latest Reuters poll of 39 analysts, and down from a 12.6 percent gain in May.
China’s commerce ministry confirmed last month that Chinese exporters were front-loading exports to the US to get ahead of expected tariffs — a situation that could exacerbate any slowdown in shipments toward the year-end.
“Looking ahead, export growth will cool in the coming months as US tariffs start to bite alongside a broader softening in global demand,” Julian Evans-Pritchard, Senior China Economist at Capital Economics in Singapore wrote in a note, though he noted a weaker yuan should help offset some of the decline.
China’s exports to the United States rose 13.6 percent in the first half of 2018 from a year earlier, while its imports from the US rose 11.8 percent in the same period.
Separate data suggested some Chinese retailers moved up orders to the US to insulate themselves from the intensifying trade war that threatens to send up costs on a growing number of consumer products.
For January-June China’s trade surplus with the United States rose to $133.76 billion, compared with about $117.51 billion in the same period last year.
After a strong start to the year, growth in China’s exports has moderated recently, and is expected to face more pressure from the initial round of US tariffs. Both official and private business surveys reported softer export orders last month.
China’s foreign trade faces risks of slowing in the second half of the year, General Administration of Customs spokesman Huang Songping told a news conference — a view backed by analysts and likely to put more strain on an economy already feeling the pinch from a multi-year debt battle that has driven up corporate borrowing costs.
Investors fear a prolonged trade battle with the United States could harm business confidence and investment, disrupting global supply chains and harming growth in China and the rest of the world.
South Korea, Asia’s fourth-largest economy, warned on Thursday that components and materials used in home appliances, computers and communications devices could be caught in the crossfire of the trade war.
Imports grew 14.1 percent in June, customs said, missing analysts’ forecast of a 20.8 percent growth, and compared with a 26 percent rise in May.
The commerce ministry also said this week it will use funds collected from tariffs charged on imports from the US to help ease the impact of US trade actions on Chinese companies and their employees.
In a sign Beijing is seeking alternative supplies of the commodities as it hit US imports with extra tariffs, China had dropped import tariffs on a range of animal feed ingredients from several Asian countries.
Separate customs data on Friday showed imports of commodities from soybeans to crude oil eased compared with a year ago, but China’s steel mills and aluminum smelters sold much more abroad spurred by higher international prices amid growing concerns about slowing demand growth.
The data could renew longstanding criticism from the United States and Europe that the world’s top metal producer is selling its surplus product abroad, hurting foreign rivals.
“We expect slowing export growth to put downward pressure on the current account and RMB (yuan), and believe China is likely to be willing to make concessions in future rounds of trade negotiations with the US,” Nomura analysts said in a note to clients. 


No need for more talks over draft budget: Lebanon finance minister

Updated 21 May 2019
0

No need for more talks over draft budget: Lebanon finance minister

  • Lebanon’s proposed austerity budget may please international lenders but it could enrage sectors of society
  • Lebanon has one of the world’s heaviest public debt burdens at 150 percent of GDP

BEIRUT: Lebanon’s finance minister said on Tuesday there was no need for more talks over the 2019 draft budget, seen as a vital test of the government’s will to reform, although the foreign minister signalled the debate may go on.
The cabinet says the budget will reduce the deficit to 7.6% of gross domestic product (GDP) from last year’s 11.2%. Lebanon has one of the world’s heaviest public debt burdens at 150% of GDP.
“There is no longer need for too much talking or anything that calls for delay. I have presented all the numbers in their final form,” Finance Minister Ali Hassan Khalil said.
But Foreign Minister Gebran Bassil suggested the debate may go on, telling reporters: “The budget is done when it’s done.”
While Lebanon has dragged its feet on reforms for years, its sectarian leaders appear more serious this time, warning of a catastrophe if there is no serious action. Their plans have triggered protests and strikes by state workers and army retirees worried about their pensions.
President Michel Aoun on Tuesday repeated his call for Lebanese to sacrifice “a little“: “(If) we want to hold onto all privileges without sacrifice, we will lose them all.”
“We import from abroad, we don’t produce anything ... So what we did was necessary and the citizens won’t realize its importance until after they feel its positive results soon,” Aoun said, noting Lebanon’s $80 billion debt mountain.
A draft of the budget seen by Reuters included a three-year freeze on all forms of hiring and a cap on bonus and overtime benefits.
It also includes a 2% levy on imports including refined oil products and excluding medicine and primary inputs for agriculture and industry, said Youssef Finianos, minister of public works and transport.
“DEVIL IN THE DETAIL“
Marwan Mikhael, head of research at Blominvest Bank, said investors would welcome the additional efforts in the latest draft to cut the deficit.
“There will be some who claim it is not good because they were hit by the decline in spending or increased taxes, but it should be well viewed by the international community,” he said.
Jason Tuvey, senior emerging markets economist at Capital Economics, said: “The numbers will be of some comfort to investors, but the devil will be in the detail.”
“Even if the authorities do manage to rein in the deficit, it probably won’t be enough to stabilize the debt ratio and some form of restructuring looks increasingly likely over the next couple of years,” Tuvey said.
The government said in January it was committed to paying all maturing debt and interest payments on the predetermined dates.
Lebanon’s main expenses are a bloated public sector, interest payments on public debt and transfers to the loss-making power generator, for which a reform plan was approved in April. The state is riddled with corruption and waste.
Serious reforms should help Lebanon tap into some $11 billion of project financing pledged at a Paris donors’ conference last year.
Once approved by cabinet, the draft budget must be debated and passed by parliament. While no specific timetable is in place for those steps, Aoun has previously said he wants the budget approved by parliament by the end of May.
On Monday, veterans fearing cuts to their pensions and benefits burned tires outside the parliament building where the cabinet met. Police used water cannon to drive them back.