Trade War with China

China's exports and imports both rose at a faster-than-expected rate in January, another sign that the Chinese economy remained resilient despite growing external uncertainties.

Total goods trade rose 8.7 percent year on year in January to 2.73 trillion yuan (395.98 billion U.S. dollars), the General Administration of Customs said in an online statement Thursday.

Exports rose 13.9 percent year on year to 1.5 trillion yuan last month, while imports grew 2.9 percent to 1.23 trillion yuan, customs data showed.

The increase in exports was significantly higher than analyst forecasts, partly driven by front-loading by exporters before the Spring Festival, which fell at the beginning of February as compared with the end of February last year, China Merchants Securities said in a research note.

"It could also be the case that the negative impacts brought by previous front-loading activities had peaked in December," it said.

While imports climbed mildly, the data also beat expectations, it noted.

Exports and imports of products under the general trade category rose 13 percent year on year to 1.66 trillion yuan, accounting for 60.9 percent of the total foreign trade, 2.3 percentage points higher than the same period last year, customs data showed.

China's trade with the European Union, ASEAN countries and Japan increased 17.6 percent, 7.8 percent and 6.5 percent, respectively, while trade with countries along the Belt and Road registered faster-than-average growth, with the combined trade volume standing at 770.8 billion yuan, up 11.5 percent year on year.

Exports to the United States went up 1.9 percent, while imports tumbled 38.6 percent, the data showed.

Private enterprises played a bigger role, accounting for 42.3 percent of the total foreign trade, up 3 percentage points year on year.

Despite mounting external uncertainties, Chinese officials believed the country is capable of maintaining stable trade growth in 2019.

The gradual recovery of global economy, China's opening-up efforts and pro-trade policies, accelerating industrial upgrading and improving corporate vitality will lend strong steam to the country's trade growth this year, Chu Shijia, head of the comprehensive department of the Ministry of Commerce, told a conference Tuesday.

China has vowed to cut taxes to a larger scale this year, which is expected to boost domestic demand and stabilize growth.

However, downward pressure on imports will still remain unless the pro-growth policies take effect, Huatai Securities said in a research note.

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Exports to the United States went up 1.9 percent, while imports tumbled 38.6 percent, the data showed.

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Totoro said:

I absolutely agree the exchange rate is crucial if Chinese nominal GDP is to match US one before 2040. If it can indeed rise against the dollar, Yuan's worth could single-handedly make up for the difference between the two GDPs. Such appreciations usually don't happen quickly, though, but either take decades or take unforseeable chaotic events or economic disasters. But yeah, if Yuan can rise 20% against dollar by 2026, that might be the year US GDP is surpassed. During the last ten years we've seen movements of up to 15%, though in both directions, like a seesaw. With current exchange rate being roughly similar to what it was 10 years ago. So I'm not sure how realistic it is to expect the exchange rate would definitely make Yuan visibly stronger, bar some economic disaster hitting someone, somewhere, within a dew decades.

Total GDP growth is indeed reported real growth plus inflation. But during the last 10 years both US and China had similar inflation rate of roughly 2%. And when that's accounted for, the difference in growth each year suddenly isn't 6.5% for China and 2.5% for US, meaning times 2.6 but 8.5% versus 4.5%, meaning 1.9 times. No one is expecting Chinese GDP growth to fizzle to 2-3% anytime soon, but even if both sides lose the same percentage of percentage of growth (say, 20%) that's 5.2% versus 2%. Or with inflation 7.2% versus 4%. Suddenly the difference is even smaller, at 1.8 times. And looking at SK/TW/JPN GDP graphs through the decades it may not be unrealistic to expect even 5% or less growth for China in the next 10 or so years.

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China and the United States started a new round of high-level economic and trade consultations in Beijing on Thursday morning.

The opening ceremony of the talks was jointly chaired by Chinese Vice Premier Liu He, also a member of the Political Bureau of the Communist Party of China Central Committee and chief of the Chinese side of the China-U.S. comprehensive economic dialogue, U.S. Trade Representative Robert Lighthizer, and Treasury Secretary Steven Mnuchin.

This round of high-level consultations will conclude on Friday.

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