China’s exports shrink most in two years, raising risks for global economy

China’s total global exports rose 9.9 percent in 2018, its strongest trade performance in seven years. (AFP)
Updated 14 January 2019

China’s exports shrink most in two years, raising risks for global economy

  • China posted its biggest trade surplus with the United States on record in 2018
  • Many US warehouses are already packed to the rafters with Chinese goods that American retailers rushed in ahead of higher tariffs

BEIJING: China’s exports unexpectedly fell the most in two years in December and imports also contracted, pointing to further weakness in the world’s second-largest economy in 2019 and deteriorating global demand.
Adding to policymakers’ worries, data on Monday also showed China posted its biggest trade surplus with the United States on record in 2018, which could prompt President Donald Trump to turn up the heat on Beijing in their cantankerous trade dispute.
Softening demand in China is already being felt around the world, with slowing sales of goods ranging from iPhones to automobiles prompting profit warnings from the likes of Apple and Jaguar Land Rover.
The dismal December trade readings suggest China’s economy may have lost more momentum late in the year than earlier thought, despite a slew of growth boosting measures in recent months ranging from higher infrastructure spending to tax cuts.
Some analysts had already speculated that Beijing may have to speed up and intensify its policy easing and stimulus measures this year after factory activity shrank in December.
Exports in December unexpectedly fell 4.4 percent from a year earlier, with demand in most of its major markets weakening. Imports also saw a shock drop, falling 7.6 percent in their biggest decline since July 2016.
“Export growth dropped more than anticipated as global growth softened and the drag from US tariffs intensified. Import growth also fell sharply in the face of cooling domestic demand. We expect both to remain weak in the coming quarters,” Capital Economics said in a note.
“Meanwhile, with policy easing unlikely to put a floor beneath domestic economic activity until the second half of this year, import growth is likely to remain subdued.”
China’s politically-sensitive surplus with the US rose 17.2 percent to $323.32 billion last year, the highest on record going back to 2006, according to Reuters calculations based on customs data.
That compared with about $275.81 billion in 2017.
China’s large trade surplus with the United States has long been a sore point with Washington, which has demanded Beijing should take steps to reduce it.
Washington imposed import tariffs on hundreds of billions of dollars of Chinese goods last year and has threatened further action if Beijing does not change its practices on issues ranging from industrial subsidies to intellectual property. China has retaliated with tariffs of its own.
However, Beijing’s export data had been surprisingly resilient to tariffs for much of 2018, possibly because companies ramped up shipments before broader and stiffer US duties went into effect.
China’s total global exports rose 9.9 percent in 2018, its strongest trade performance in seven years, while imports increased 15.8 percent last year.
But December’s gloomy data seemed to suggest the US front-loading effect has tapered off, and after several months of falling factory orders a further weakening in China’s exports is widely expected in coming months.
Many US warehouses are already packed to the rafters with Chinese goods that American retailers rushed in ahead of higher tariffs.
China exports to the US declined 3.5 percent in December while its imports from the US were down 35.8 percent for the month.
The higher tariffs China levied on US supplies also hit the country’s overall import growth. For all of 2018, soybean, the second largest imports from the US, fell for the first time since 2011.
Even if Washington and Beijing reach a trade deal in their current round of talks, it would be no panacea for China’s slowing economy, analysts say.
Sources told Reuters last week that Beijing is planning to lower its economic growth target to 6-6.5 percent this year after an expected 6.6 percent in 2018, the slowest pace in 28 years.


Lebanon removes banking secrecy rules to fight corruption

Updated 28 min 3 sec ago

Lebanon removes banking secrecy rules to fight corruption

  • The move opens the way for investigations into bank accounts of current and former officials such as Cabinet ministers

BEIRUT: Lebanon’s parliament approved on Thursday a law to remove decades-old banking secrecy rules in order to better fight rampant corruption that has pushed the country to the edge of economic collapse.
The move opens the way for investigations into bank accounts of current and former officials such as Cabinet ministers, legislators and civil servants, state-run National News Agency reported.
The restoration of stolen public money in the corruption-plagued nation has been a key demand of protesters who have been demonstrating since mid-October against Lebanon’s ruling elite, which they blame for widespread corruption and mismanagement.
The approval of the law came two months after the Cabinet approved a draft resolution to abolish the country’s banking secrecy laws, which have turned tiny Lebanon into the region’s Switzerland, attracting clients from around the Arab world who prized the anonymity its banks offered.
The new law gives powers to National Anti-corruption Commission and a Special Investigative Committee at the central bank to investigate bank account of officials, the report said.
For Thursday’s session, Lebanese lawmakers convened inside a Beirut theater so that they could observe social distancing measures imposed during the pandemic. Dozens of anti-government demonstrators briefly clashed with riot police outside as legislators met.
As lawmakers in face masks arrived at the theater, known as the UNESCO palace, paramedics sprayed them with disinfectant before they entered, one at a time.
Lebanon has been facing its worst economic crisis in decades, with unemployment figures soaring and the local currency losing more than half of its value against the dollar.
After the banking secrecy measure was passed, Parliament Speaker Nabih Berri suspended the session until later in the afternoon when the legislators were to discuss a draft general amnesty law.
The amnesty issue has deeply divided parliamentary blocs, with Christian groups calling for pardoning Lebanese who fled to Israel after it ended its occupation of southern Lebanon in 2000, while former Prime Minister Saad Hariri and others want the release of hundreds of Islamists held as terror suspects.
Lebanon and Israel are at a state of war and some Lebanese who fled to Israel now hold Israeli citizenship. Scores of protesters demonstrated in Beirut and southern Lebanon on Thursday against pardoning those living in Israel.