China’s imports jump as it digs in for a trade fight

13-Aug-2018

China’s imports surged in July as it moved to shore up its economy and prepared for a long-term trade battle with the U.S.

Beijing has asked banks and local governments to stimulate rail and other infrastructure projects in the wake of slowing economic-growth momentum. The leadership is gearing up for future tariffs that could hit China’s economy harder down the road, economists say.

Boosted by a strong appetite for commodities, China’s imports were up 27.3% in July from a year earlier, the General Administration of Customs said Wednesday, accelerating from a 14.1% increase the previous month. Economists polled by The Wall Street Journal had expected a 15.3% gain.

“Imports of commodities should strengthen in the second half of the year due to an increase in infrastructure spending,” said Liu Yaxin, an economist at China Merchants Securities .

By value, imports of coal, crude oil and iron ore rose 73%, 63% and 20%, respectively, in July from a year earlier, according to calculations by The Wall Street Journal based on customs data. Imports from Australia rose 34% last month.

Robust new-home starts in smaller cities will probably sharpen China’s appetite for raw materials, Ms. Liu said.

Expectations for the yuan to depreciate further against the U.S. dollar also promoted imports, said Liu Xuezhi, an economist at Bank of Communications. The yuan dropped 3% against the dollar last month.

A cheaper yuan, which makes imported goods more expensive for Chinese buyers, should have helped China’s exports.

Exports rose 12.2% from a year earlier following June’s 11.3% increase, customs data showed. The economists polled had forecast the value of shipments overseas to grow 10%. Exports to the U.S. held up, growing 11% in July, despite 25% tariffs on $34 billion of Chinese goods early last month.

China reported a trade surplus of $28.05 billion in July, compared with a surplus of $41.61 billion a month earlier. The country’s trade surplus with the U.S. narrowed slightly to $28.09 billion in July from a record monthly high of $28.90 billion in June, the data showed.

State-run media outlets stepped up their rhetoric to stoke confidence in the country’s future and called on Chinese from all walks of life to weather hard times.

“China is still one of the countries with the best development, biggest growth potential and most sufficient resilience,” the official Xinhua News Agency said in a commentary Tuesday. “We will create beautiful lives regardless of wind or rain.”

On Tuesday, the Trump administration completed plans to impose new tariffs on $16 billion in Chinese imports to the U.S. to punish Beijing for its trade practices, bringing the total value of products covered by the duties to $50 billion by the end of the month.

China’s cabinet released last week a list of $60 billion of U.S. goods to hit with tariffs. The planned levies, on imports including farm products, machinery and chemicals, range from 5% to 25%. The planned Chinese penalties come on top of the tariffs on $50 billion in American goods that Beijing has imposed or said it would impose.

China’s trade surplus will probably continue to narrow for the rest of the year, driven by weaker exports and stronger imports, said Betty Wang, an economist at ANZ.

“Impacts of U.S. tariffs on China’s trade will become more prominent in the fourth quarter, if the two make no progress on easing tensions,” Ms. Wang said.

Source: THE WALL STREET JOURNAL