MNI ANALYSIS: China Exports Growth Undented as Trade War Looms

     BEIJING (MNI) - China's trade performance showed unexpected resilience in

the early days of a widening economic conflict with the U.S. Exports largely

kept the pace of growth while imports spiked following a major tariff reduction

on consumer goods and auto, official data on Wednesday indicated.

     The value of exports increased by 12.2% y/y to USD215.57 billion in July,

beating MNI's survey for a 10.1% gain. Exports to the U.S., against which China

had traded tit-for-tat punitive tariffs, softened to $41.54 billion from the

previous month of $42.62 billion. 

     Analysts had been looking for signs of impact from the China-U.S. trade

spat. On July 6, the White House threw the first real punch imposing an extra

25% tariff on a list of Chinese goods valued at $34 billion, followed by the

announcement of 25% on a second list worth $16 billion on Aug 23. Given that the

market had long anticipated the moves, it may be too soon to assess the impact

of the still-brewing conflict. 

     For the first seven months, exports rose 12.6% y/y to USD1.39 trillion,

compared with 8.3% a year ago, underlying a strong recovery in global demand for

Chinese goods. 

     --EXPANDING IMPORTS

     China impressed with its purchasing power in July, the first month since

cutting tariffs on consumer goods as well cars. Imports surged 27.3% y/y to

USD187.52 billion from June's 14.1% growth, exceeding the market's expectation

for a 17.0% gain. The growth was the second-fastest in 2018, lending credibility

to the government's vow to expand imports and further open up. China had for

months trumpeted its decision to lower tariffs for consumer goods and autos by

25% - 76% on July 1.

     For the first seven months, imports increased by 21.0% y/y to USD1.22

trillion, higher than 17.6% seen last year.

     In terms of origins, imports from the EU and Japan both registered faster

growths from the previous month - by 20.5% and 13.8% respectively, compared with

-14.1% and -6.0%. This suggests that China is diversifying its sources of

imports away from the U.S.

     China's trade surplus has shown y/y reduction for five consecutive months,

with July's 38.5% fall being the sharpest. 

     --U.S. LARGEST SURPLUS

     The U.S. still contributed to the largest chunk of China's surplus, valued

at $28.09 billion, followed by EU with $11.21 billion.

     Among the trading partners that carried trade deficits with China, Taiwan

came first with $11.92 billion, while South Korea and Australia accounted for

$9.37 billion and $5.76 billion.

--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: flora.guo@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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