US protectionism could weigh on Chinese export growth, narrowing the trade surplus further. Photo: iStock
The coronavirus has threatened the US-China trade deal. Photo: iStock

Whichever way you look at it, the latest trade figures from China will make uncomfortable bedtime reading for Donald Trump. In yuan or dollar terms, the numbers are dripping with red ink, which will fail to amuse the US President.

Official data released by the General Administration of Customs on Friday showed that China’s trade surplus with the United States increased to a whopping 1.87 trillion yuan, or US$275.81 billion, last year. This topped the previous record of $260.8 billion in 2015.

Just 24 hours earlier, Trump had told The Wall Street Journal he would have pressed for sterner measures to resolve the trade imbalance with China but for Beijing’s assistance in dealing with North Korea.

“We’ve been much tougher on China, but not nearly as tough as I would be, but they are helping us a lot with North Korea,” he said.

Still, a detailed look at the numbers showed that China’s global exports surged by 10.8% in yuan terms last year compared to 2016 with strong growth registered in November and December. Imports also increased by 18.7% during the same period.

As for the big figure, China’s politically-contentious trade surplus came in at 2.87 trillion yuan, or $441.9 billion, for 2017, which was down from last year’s figure of $509.7 billion, official Customs statistics revealed.

“Downside risks remain, in particular from more forceful US trade restrictions on Chinese exports,” Louis Kuijs, a leading economist at Oxford Economics, said in a report.

Trade with China has become a sensitive issue, with Trump repeatedly signaling that tougher action should be used to crackdown on what he calls “unfair practices.”

The European Union has voiced similar concerns with the French President, Emmanuel Macron, warning during his visit to Beijing this week that China must “increase market access or face other nations closing theirs.”

All this comes at a time when the Chinese government is trying to realign the economy toward domestic consumption. Known as the “new normal,” “high-quality” growth has become a fashionable mantra in President Xi Jinping’s inner circle.

Yet these figures will come as an embarrassment after pledges were made during Trump’s China visit in November for a more balanced trading partnership. Deals worth up to $250 billion were signed at the time.

“What history tells us is that a trade war is terrible for surplus countries,” Michael Pettis, a Peking University professor of finance, told the South China Morning Post newspaper. “China [will get]  hurt the most by these trade problems.”

To underline the strength of the world’s second-largest economy’s manufacturing base, the trade surplus leapt to the highest level in nearly two years in December. This was fueled by booming exports, such as electronics, household appliances and a vast array of consumer goods, as well as a surprising slowdown in imports.

Again, official data showed China’s trade surplus increased to $54.69 billion last month compared to $40.21 billion in November. During the same period, the trade surplus with the US came in at $25.55 billion, compared to $27.87 billion in November.

“China continued to build on a solid foundation for steady growth, its potential being gradually unleashed,” Huang Songping, a spokesman for the General Administration of Customs, told a media briefing in Beijing.

“As the global economy continues to recover and the Chinese economy turns to steady and sound growth, the country’s foreign trade outlook in 2018 is upbeat.”

But last month’s slowdown in imports, which expanded at just 4.5% to $177.1 billion compared to November’s 17.7% gain, will raise a few heckles. It will also come as a shock to China’s Asian neighbors, such as Australia, who supply raw materials like iron ore.

“We have long expected China’s domestic demand and imports to slow in 2018 on gradually tighter monetary and financial policies, and slower real estate activity,” Kuijs, of Oxford Economics, told Associated Press.

Next week, the International Monetary Fund will release last year’s GDP growth figure for China. It is expected to be just under 6.8%. In 2018, the IMF is predicting a slight decline to 6.5%, which will still be stronger than its major competitors.

“For 2018, we think solid global growth will likely provide some support for Chinese export growth,” Nomura economists wrote in a note. “But later this year, we believe exchange rate appreciation and an increase in US protectionism could weigh on Chinese export growth, narrowing the trade surplus further.”

In layman’s terms, that means buckle up and be ready for round two of Trump’s economic war of words with Xi.

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