BEIJING: China’s exports and imports contracted less than expected in October, providing some relief for the economy as Beijing tries to reach a partial trade deal with Washington.
But even if a US-China trade deal is signed soon, economists say it is unlikely to help boost exports and manufacturing for some time yet and could still mean more stimulus is needed from Beijing to avert a sharper downturn.
China’s October exports fell for the third straight month, down 0.9 per cent from a year earlier, customs data showed yesterday, less than a 3.9pc fall forecast in a Reuters poll and September’s 3.2pc contraction.
“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.
He attributed the rise in exports to a pick-up in US demand after both countries outlined an interim deal and Washington suspended a threatened tariff hike set for October 15.
There were other bright spots in the data. Exports to the US in October fell 16.2pc, less than a 21.9pc drop the previous month, according to Reuters calculation based on customs data.
Betty Wang, senior China economist at ANZ, said anecdotal evidence also showed exports may have been boosted as Chinese firms rushed out hi-tech shipments after the US government put some of the country’s tech firms on a trade blacklist.
China’s imports shrank for the sixth consecutive month, though the 6.4pc drop was smaller than an expected 8.9pc and September’s 8.5pc decline.
That left China with a trade surplus of $42.81 billion in October, versus September’s $39.65bn surplus. Analysts had forecast a $40.83bn surplus.
Despite the more modest drop in imports, domestic demand appeared to remain weak, with imports of iron ore and copper falling.
The trade data lines up with recent readings on shrinking factory activity and bleak producer prices. The slowdown points to lingering weakness in domestic demand and the limited impact of policy stimulus so far.
Beijing and Washington have been locked in a trade feud for 16 months, but hopes have risen that an initial deal may be signed soon.
China’s trade surplus with the US was at $26.42bn in October, up from $25.88bn in September, according to Reuters calculation based on customs data.
Economists and analysts warn that the path toward a full deal is still highly uncertain and expect that a partial trade deal may only relieve some pressure on the world’s second-largest economy.
“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.
Kuijs and others noted an improvement in import volumes, which could continue to gradually recover especially as local government step up infrastructure spending.
China’s third-quarter economic growth cooled to its weakest pace in almost three decades hurt by soft global demand, slowing consumption at home and heightened trade risks.
To boost credit, the People’s Bank of China cut the interest rate on its one-year medium-term lending facility (MLF) loans on Tuesday for the first time since early 2016.
Analysts said the cut, while modest, may be a sign the central bank is turning more proactive, following a slew of downbeat economic data suggesting more stimulus is needed soon.
China on Tuesday sold 4bn euros in a three-part debt deal, its first re-issue of euro-denominated sovereign bonds in 15 years. The deal sets a benchmark for Chinese issuers in the euro market, which could help steer corporate issuance away from dollar-denominated debt.
Bank of China, Bank of Communications, China International Capital Corp, BofA Securities, Citigroup, Commerzbank, Credit Agricole, Deutsche Bank, HSBC, Societe Generale, and Standard Chartered were the joint lead managers and book runners of the sale according to the pricing sheet.