China's trade surplus widens as imports moderate

Beijing - China’s trade surplus widened for a fifth month in July as export growth remained solid and imports moderated, keeping the spotlight on a trade gap US President Donald Trump aims to narrow.

Key points

• Exports rose 7.2% in US dollars as imports increased 11%, both falling short of economist projections.

• The trade surplus widened to $46.7bn.

• Shipments to the US rose 8.9% versus 19.8% in June, narrowing the trade surplus with the world’s biggest economy slightly to $25.2bn.

Big picture

Demand for Chinese products has remained resilient as growth in major trading partners continues to recover.

At home, stronger-than-expected output is supporting robust import demand. Yet the world’s largest exporter confronts more uncertainty as US President Donald Trump continues sporadic tough talk on trade. The White House may be considering a probe of alleged intellectual property violations, which could risk igniting trade tensions.

Economist takeaways

"Overall exports and imports are still resilient," Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group in Hong Kong, said in a Bloomberg Television interview.

"After an impressive rebound over the first half of 2017, trade is taking a little breather," said Frederic Neumann, co-head of Asian economics research at HSBC in Hong Kong. "It’s not exactly that the bottom is falling out of the trade cycle, but it was always going to be tricky to maintain double digit export growth for the rest of the year."

"Exports slowed in July, a reminder that despite robust demand the world’s factory has limited scope to grab increased market share," Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a report. "If exports now come off the boil, that would provide additional reason for caution on deleveraging."

"China’s trade surplus actually is heading downward if you look at a year-on-year comparison," said Gai Xinzhe, an analyst at Bank of China’s Institute of International Finance in Beijing.

"In the meantime, the July figures give China a little better position at the negotiation table with Trump. Clearly, China can say we have done much work to balance our trade relations, and here are the numbers."

"Trade uncertainty has increased," Liu Liu, an economist at China International Capital in Beijing, wrote in a report after the data. "While trade frictions in certain areas may increase, a large-scale trade war is unlikely.

As the second largest world importer, China has significant bargaining power in trade negotiations. Even if trade friction escalates, the Chinese economy is unlikely to be significantly impacted."

The details

• Crude imports fell the lowest in six months.

• Iron ore imports rose 7.5% on-year in the January-to-July period.

• Natural gas imports jumped 20.7% in the same period.

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