China’s exports hit a 27-month high in October, as exporters rushed to front-load orders, but the trade outlook remains uncertain ahead of president-elect Donald Trump’s upcoming return to the White House, analysts said.
Exports rose by 12.7 per cent year on year to US$309 billion in October, according to customs data released this week.
The figure was significantly higher than the expected 5.5 per cent increase surveyed by Chinese financial data provider Wind, and exceeded the 2.4 per cent rise recorded in September.
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But the world’s second-largest economy could face greater shock if Trump extends tariffs from made-in-China to made-by-China when he takes office in January, analysts said.
“China’s export data reflect the improving global demand from lower interest rates and some front-loading demand,” said Gary Ng, a senior economist at French investment bank Natixis.
Trump’s victory over Vice-President and Democratic candidate Kamala Harris has heightened concerns among Chinese exporters, as his expected trade policies toward China – including potential tariffs of 60 per cent – add uncertainties to its trade outlook.
“With a weaker economy, Trump’s broad-ranging tariffs could hurt China’s export engine more than before,” Ng added.
“China’s exposure to the US can be larger than the 16 per cent shown in direct trade because Americans are the end users of products globally.”
“Such a shock can be even greater if Trump extends tariffs from made-in-China to made-by-China, including production in countries such as Vietnam and Mexico. Chinese exporters will likely cut prices further to counter the pressure.”
Last month, though, China saw an increase in exports to its major trading.
Exports to the United States increased by 8.1 per cent, while shipments to the European Union rose by 12.72 per cent
China’s exports to the Association of Southeast Asian Nations, meanwhile, rose by 15.78 per cent in October compared with a year earlier, while exports to Russia increased by 26.7 per cent, recording the fastest growth since November last year.
“[The trade growth] may partly be driven by exporters trying to front-load shipments in order to mitigate the damage of potential trade war next year,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.
Elsewhere, China’s imports fell by 2.3 per cent from a year earlier in October, compared to the 0.3 per cent growth seen in September.
This led to a trade surplus of US$95.72 billion in October, compared with US$81.71 billion in September.
Larry Hu, chief China economist at Macquarie Capital, said the trade war 2.0 could end China’s ongoing growth model, in which exports and manufacturing have been the main growth driver.
“A 60 per cent tariff hike by the US could cause China’s total exports to fall by 8 per cent over the next 12 months. Taking into account of capital expenditure and business confidence, trade war 2.0 could subtract China’s growth by 2 percentage points,” he said.
“If that happens, Beijing will have no choice but to escalate stimulus, especially in housing.”
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