Even as China is attempting to finalize a partial trade deal with the United States, some relief came for Beijing because the contraction of the exports and imports of the country for the month of October was less than expected by analysts.
According to economists, there is little chance that the exports and manufacturing sector of the Chinese economy would stage a turnaround soon enough even if there is a partial trade deal signed between the US and China which could still mean that there is still need for more stimulus from Beijing if a sharper downturn is to be avoided.
There was a 0.9 per cent drop year on year in the exports for the month of October of China – which is a third straight month of fall according to customs data revealed on Friday. That drop was lower than the 3.9 per cent drop in the figures as forecast in a Reuters poll as well as the 3.2 per cent contraction in September.
“Even if the “phase one” US-China trade deal crosses the finish line, it is unlikely to alleviate the main headwinds facing exporters and outbound shipments look set to remain weak in the coming months,” said Martin Rasmussen, China economist at Capital Economics.
This lower than expected drop in exports was driven by an increase in a gain in demand in the United States following optimism after both the countries announced the possibility of an interim deal as well as because of the suspension of a threatened tariff hike set for October 15 by Washington.
Apart from the export data, some other positives also emerged. There was a 16.2 per cent drop in the exports to the United States in October which was lower than the 21.9 per cent drop in the month earlier as calculated by Reuters on the basis of customs data.
There may also have been an increase in exports because Chinese companies hurried to make shipments of hi-tech products following the listing of the US government of some Chinese tech companies on a trade blacklist according to anecdotal evidence, said Betty Wang, the senior China economist at ANZ.
It is widely expected that the US will scrap a new tariff that was to be implemented starting December 15 on Chinese goods worth about $156 billion and includes a range of consumer goods such as cell phones, laptop computers and toys, if there is a partial trade agreement between the two countries.
On the other hand, in October, the trade surplus of China with the United States was at $26.42 billion which was more than the $25.88 billion deficit in trade in September between the two largest economies of the world. According to economists, both the countries have quite a distance to travel before a comprehensive trade agreement is arrived at by the two parties and only some pressure on the world’s second-largest economy can be relieved by a partial trade deal.
“We remain cautious on this. It is unlikely that the bulk of existing tariffs will be removed soon and other types of restrictions are also coming, implying decoupling and tension,” said Louis Kuijs, head of Asia economics at Oxford Economics.
(Adapted from News18.com)