Chinese exports remain on the downside – UOB

Suan Teck Kin, CFA and Ho Woei Chen, Economist, at UOB Group give their opinion on the latest results from Chinese trade data.

Key Quotes

“China’s export growth in USD terms was weaker-than-expected at -1.0% y/y (exp: +2.2%, Jul: +3.3%) in Aug while imports contracted for the fourth consecutive month at -5.6% y/y (exp: -6.4%, Jul: -5.6%). Trade surplus narrowed to US$34.84 bn from US$44.58 bn in Jul. Year-to-date, exports and imports registered +0.4% y/y and -4.6% y/y respectively”.

“The expected frontloading of exports to the US did not take place before new US tariffs of 15% on some US$110bn of Chinese goods became effective on 1 Sep. The contraction in China’s exports to the US accelerated to -16.0%y/y in Aug compared to -6.5% in Jul and was the largest pace of decline in six months. At the same time, China’s imports from the US continued to drop for the 12th consecutive month in Aug at -22.3% y/y vs. -19.1% in Jul. China’s trade surplus with the US narrowed to US$26.95bn in Aug from US$27.97bn in Jul. YTD, trade surplus with the US was still ahead at US$195.30bn compared to US$193.13bn in Jan-Aug 2018″.

“The generally weaker imports underlined lower demand for investment and consumption in China, while signalling that growth will continue to moderate in 2H19″.

“Looking ahead, we see greater downside risk to China’s export growth in the coming months in view of the implementation of more additional tariffs by both US and China. Following a notice and comment period, US is scheduled to raise the tariff rate on US$250bn of Chinese goods from 25% to 30% on 1 Oct and implement 15% additional tariffs on US$160bn worth of Chinese goods on 15 Dec. China, too is prepared to implement 5% or 10% additional tariffs on the second tranche of the US$75 of US goods on 15 Dec”.