Published: Sat, August 10, 2019
Markets | By Erika Turner

China exports recover despite trade war

China exports recover despite trade war

China has raised the prospect of limiting rare earth exports to the United States in retaliation for US tariffs, another batch of which are set up come into force from September on around $300 billion of Chinese goods.

Analysts say a sharp drop in the yuan currency this week may offer only limited help for Chinese exporters, who are facing additional US levies next month, shrinking profit margins, and sputtering demand worldwide.

Customs data on Thursday showed imports of USA goods fell 19% from a year earlier, though that was an improvement over June's 31.4% plunge.

A steep fall in the Chinese currency had led the benchmark S&P 500 and Nasdaq record their sixth straight session of declines, losing at least three per cent each on Monday.

But it does not look to be out of the woods yet, with shrinking imports pointing to weak demand at home. Still, the drop was less than an expected 8.3 per cent and June's 7.3 per cent.

It acted after China chose to let the yuan fall below the key seven-per-dollar level for the first time in more than a decade, rattling financial markets and dimming hopes for an end to a trade war that has dragged into a second year. Analysts had forecast a surplus of US$40 billion for July.

Trump told reporters at the White House that the market reaction had been anticipated, but he remained confident in the strength of the US economy.

Fears rose in global financial markets and sparked greater vulnerability since the previous week, as the USA chose to impose tariffs on another $300bn of Chinese goods starting on 1 September.

An official Chinese think tank attributed the rise in exports partly to Beijing's Belt and Road initiative, a program that aims to boost business and trade ties with dozens of countries across the world.

"In this case, the trade dispute between China and the United States is hurting both parties and the global economy".

Weaker dollar, possible producer action buoy oil prices after 4% slump
A pump jack operates in the Permian Basin oil and natural gas production area near Odessa, Texas, U.S., February 10, 2019. Brent crude futures LCOc1 settled down $2.71, or 4.6%, at $56.23 a barrel, the lowest close since early January.

In the first seven months, they contributed a total of 7.31 trillion yuan to China's exports and imports, up 11.8 percent, accounting for 42 percent of the total foreign trade value which is 2.9 percent higher than the same period a year ago.

The United States raised tariffs on a large number of Chinese goods in May, after trade negotiations broke down, and Beijing retaliated.

President Trump's latest threat to slap elevated tariffs on Chinese goods could weigh heavily on consumers in the form of higher prices soon. Following confirmation from China that it would again stop buying United States agricultural products, Trump tweeted that China would not be able to hurt farmers and hinted at more financial support.

China's customs data showed the value of its soybean imports down 17.1 percent in the first seven months of the year.

The Dow and the broader USA stock market rebounded Tuesday, driven by optimism that currency tensions between the United States and China would ease.

"Without a better economy, it's hard to see how he wins re-election".

But analysts remain optimistic of domestic demand as total steel output is still running at a high level and as anti-pollution curbs are expected to be relaxed in August.

Investors feared the label would eliminate China's incentive to slash the value of the yuan versus the dollar, setting off a currency war with the United States.

China's trade liberalization efforts, such as the expansion of the China (Shanghai) Pilot Free Trade Zone and the hosting of the second China International Import Expo, scheduled for November, will also help the country to put its foreign trade on a firmer footing, said Wei Jianguo, vice-president of the China Center for International Economic Exchanges.

A weaker yuan also might disrupt Chinese efforts to shore up cooling economic growth.

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