Published: Mon, November 12, 2018
Markets | By Otis Pena

China Oct exports surprisingly strong in race to beat higher US tariffs

China Oct exports surprisingly strong in race to beat higher US tariffs

However, its surplus with the USA fell to US$31.78 billion in October, down from a record high of US$34.13 billion in September.

Imports also beat expectations, jumping to 21.4 per cent, up from 14.3 per cent in September and well above the Bloomberg median forecast of 14.5 per cent. Allan von Mehren, Chief Analyst at Danske Bank, points out that it was due to front-loading of USA imports from China ahead of the possible rise in tariffs.

Analysts were expecting China's trade surplus to have widened to US$35 billion in October from September's US$31.69 billion. The upbeat trade readings from China offer good news for both those anxious about global demand and for the country's policymakers after the economy logged its weakest growth since the global financial crisis in the third quarter. Chinese leaders have cut tariffs on non-U.S. goods and promised to encourage imports of consumer goods but reject pressure to roll back plans for state-led development of technology industries. But analysts say robust export readings won't last much longer, noting Chinese factory surveys have been showing contracting export orders for months.

US import volumes began soaring this summer, and data continue to show no signs of a slowdown in trade flows from China to the U.S.

Traders are rushing to beat a US tariff hike planned for January, ING economist Iris Pang said in a report.

"As we expect President Xi's meeting with Presdient Trump at the end of November will not achieve positive results, the increase of the current tariff rate from 10% to 25% on $200 billion of U.S. imported goods from China is a high probability event".

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"Front-loading export activities should continue in November and December", Iris Pang, economist with ING, wrote in an analysis.

One reason for the surge is companies are eager to avoid even higher duties in a few months' time: The US tariffs on $200 billion of Chinese goods that kicked in on September 24 are set to rise from 10% to 25% at the end of the year. "We are not particularly optimistic on China export growth in 2019".

While China's exports are expected to falter soon, its imports, especially commodities, could remain strong for months to come as Beijing rolls out more measures such as infrastructure spending to boost domestic demand, economists at ANZ said.

"We expect this trend to continue in the coming years, supported by the trade conflict with the U.S. and reduction in Chinese import tariffs".

Speaking at China's first imports expo in Shanghai, Xi also announced the country would buy US$10 trillion worth of foreign services in the same period.

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