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Chinese exports slide as trade war weighs heavily

By Abigail Townsend

Date: Monday 09 Dec 2019

Chinese exports slide as trade war weighs heavily

(Sharecast News) - Chinese exports fell in November as country's bitter trade war with the US continued to weigh on the economy, although import growth did come in ahead of economists' forecasts.
Total exports fell 1.1% in comparison to a year ago, the fourth consecutive drop, while exports to the US slumped 23%. The latter was the worst fall since February and marks the twelfth month of declines.

In the year to November, exports to the US were down 11.1%, an acceleration on the year-to-date fall of 10.6% seen in October, and a stark contrast to growth of 28.5% a year earlier.

The trade surplus eased to $38.7bn, which was well below consensus, from a revised $42.5bn in October,

Imports rose in November, however, by 0.3%, the first year-on-year growth since April, a possible hint of improving conditions in the Asian giant's domestic economy. Analysts had pencilled in a 1.8% decline.

Nonetheless, Julian Evans-Pritchard at Capital Economics highlighted how, in seasonally-adjusted terms, overall imports were in fact stable while those from the US in fact fell.

"While Chinese officials will no doubt highlight the surge in y/y growth in imports from the US during trade talks, in seasonally adjusted terms purchases from the US fell the most last month since December 2018," Evans-Pritchard said.

The 17-month trade war between the US and China has seen both sides impose tariffs on imports. Talks are currently focused on securing a so-called phase one deal before 15 December, when the US is scheduled to impost a new round of tariffs on $156bn of Chinese exports.

But the negotiations have been affected by a number of issues, including Washington infuriating Beijing by signing the Hong Kong Human Rights and Democracy Act into law. Until the phase one deal is secured, negotiators are unable to move onto the more ambitious, but also more contentious, phase two deal.

Craig Erlam, senior market analyst at Oanda, said: "The talks continue as Chinese trade data showed exports contracting for a fourth consecutive month, although imports were better than expected, suggesting domestic demand remains decent.

"Still, it doesn't take a genius to see that the trade war has severely taken its toll on Chinese trade."

Joshua Mahony, senior market analyst at IG, said: "With Chinese exports falling by 1.1%, questions continue to be asked over the growth prospects in the world's second-largest economy. [US president Donald] Trump will hope this news helps shift the dial in trade negotiations. However, when stripping out trade in commodities, we have seen the Chinese surplus push towards record highs to signal an element of strength than can be lost in the headline figures."

Freya Beamish, chief Asia economist at Pantheon Macroeconomics, said: "Tech products were largely responsible for the rebound in imports excluding soybeans, metals and energy. At the same time, the overall story in volumes terms is weaker, with imports likely merely sneaking higher, while exports continued falling substantially.

"It's still early in the quarter, but these data suggest an increase in the drag from net exports on GDP, at -0.2 percentage points in the fourth quarter, compared with 0.1 percentage points in the third."

SP Angel noted: "Weak trade momentum further highlights the need for a trade truce with the US, and a completion of the phase one agreement that was first flagged in October."

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