China's surplus with the US at highest level since 2006, casting shadow on future talks

By Li Xuanmin Source:Global Times Published: 2019/1/14 19:33:39

Chinese firms move to diversify foreign markets

China's surplus with the US in 2018 reached the highest level since 2006, and experts said this shows that the US is losing more from the trade war than China. Photo: VCG

Despite a volatile 2018, China achieved record-high foreign trade worth $4.62 trillion in the last year and a reduction in its trade surplus to the lowest since 2013, which highlights its optimized trade structure and its economy's vitality and resilience despite the lingering trade frictions with the US.

Although last year's overall trade surplus shrank, China's trade surplus with the US still grew by 17 percent year-on-year to $323.32 billion in 2018, the highest on record since 2006, indicating that US President Donald Trump's trade war against China to narrow the trade deficit has backfired. 

China's exports to the US jumped 11.3 percent year-on-year in 2018 to $478.4 billion in dollar-denominated terms, while imports from the US to China remained sluggish, only growing a negligible 0.7 percent to $155 billion, according to data released by the General Administration of Customs (GAC) at a press briefing held by the State Council, China's cabinet, on Monday.

China's huge trade surplus with the US has been the center of targets under the Trump administration, but the ever-expanding trade surplus - which comes after the two countries traded tit-for-tat tariffs and held talks to resolve trade disputes - "only shows that the US is losing more from the trade war than China," Huo Jianguo, vice chairman of the China Society for World Trade Organization Studies in Beijing, told the Global Times on Monday.

Exports vs imports

Analyst said that a recovering US economy has fueled booming market demand for Made-in-China products that are irreplaceable and have an overwhelming competitive edge in quality and price.

When it comes to Chinese exports to the US, high-tech commodities - like auto parts or boilers - and labor-intensive products like lamps, luggage or sporting goods recorded rapid growth in the first three quarters of 2018, according to media reports.

On the other hand, Chinese firms and trade agencies have rushed to relocate their orders last year to other sources over tariffs concerns, which partly lead to a meager freight shipment from the US.

The statistics suggest that US shoppers still turn to certain Chinese products and increasingly rely on them.

For example, last year, China's soybean imports declined 7.9 percent year-on-year to 88.03 million tons, Customs data showed. The drop, which was the first annual drop since 2011, comes after China ramped up efforts in 2018 to diversify sources of soybean imports to countries such as Brazil and Argentina.

China's trade with other major trading partners showed an upward trend. Trade with countries and regions along the Belt and Road initiative rose 13.3 percent to 8.37 trillion yuan last year, while routes of trade with the EU - the country's largest trading partner - also expanded by 7.9 percent, Customs data showed. 

Nick Marro, an Economist Intelligence Unit analyst, told the Global Times on Monday that the ballooning US trade deficit, which is likely to sit uncomfortably with the Trump administration, may cast a shadow on the next round of trade talks between the world's two largest economies.

China and the US just ended a three-day vice-ministerial level trade talks in Beijing January 7-9, which some observers believe has yielded small progress toward a final deal. 

Huo also expressed a similar concern. But Mei Xinyu, an expert close to the Chinese Ministry of Commerce, pointed out that amid the US-led attempt to counter China's technological rise, "what else could China import from the US other than their knock out products?" 

"Trump had better learn a lesson from the rising trade surplus: No matter how bullish his rhetoric sounds, he cannot go against economic rules and trade divisions," Mei told the Global Times on Monday.

A robust growth

Aside from China-US trade data, China's overall trade performance has been closely watched by industry insiders as a gauge on whether the trade tensions between Beijing and Washington would weight on China's macroeconomic data. And the newly released Customs data on Monday sends an upbeat signal to the Chinese economy.

In 2018, China's foreign trade hit $4.62 trillion in dollar-denominated terms, up 12.6 percent year-on-year, with exports and imports up 9.9 percent and 15.8 percent, respectively, compared to 2017. The overall trade growth rate is higher than China's GDP growth rate of 6.7 percent in the first three quarters of 2018. 

Taking account of the rising global uncertainty and protectionism, industry insiders have hailed the record trade level as remarkable and a testimony to the growing competitiveness of Chinese exports as well as the ability of Chinese enterprises to explore and cut into markets other than the US.  

In terms of exports, China's structure is improving as electro-mechanical products represent a larger share. In 2018, exports of electro-mechanical products surged by 7.9 percent to 9.65 trillion yuan, or 58.7 percent of China's total export value, a 0.4 percentage point increase from 2017, customs data showed. 

An executive of a light-manufacturing company in Yiwu, East China's Zhejiang Province surnamed Ying told the Global Times that his firm has shifted most of the focus from the US to the Indian market. 

"We're recording about a 50 percent growth in the Indian market, and I believe the growing incomes in India, combined with other markets, could compensate losses in the US in the next few years," Ying said.  

The steady growth in China's foreign trade last year was also boosted by Chinese policymakers' moves to lift trade barriers and encourage imports, Li Kuiwen, GAC spokesperson, told the press briefing.

China's trade slumped in December, with exports in dollar-denominated terms falling 4.4 percent while imports dropped 7.6 percent. Some observers predict that as the effect of front-loaded demand prior to higher tariffs continue to vanish, China's exports to the US are likely to weaken this year.

But Li said China's foreign trade growth may slow down in 2019 due to external uncertainties, rising protectionism in foreign countries and a slowing global economy. 

Regardless of the headwinds, China's trade will "still maintain a steady growth momentum as China further opens up its economy and pushes forward supply-side reform," Li emphasized. 

Newspaper headline: China scores trade record in 2018


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