China’s exports are doing way better than expected

Posted at 10:54 PM, Feb 13, 2019
and last updated 2019-02-14 05:07:09-05

China has posted a surprise jump in exports, suggesting its economy could be holding up better than expected as it tries to negotiate an end to the trade war with the United States.

The value of Chinese goods exported in January grew 9% from a year earlier, according to government data published in Beijing on Thursday. The robust performance surprised economists, who had expected exports to shrink for the second month in a row.

The slowdown in China’s giant economy has alarmed businesses and investors around the world — and it could get worse if Beijing and Washington fail to reach a trade deal. Top companies including Apple and Caterpillar have blamed weakness in the world’s second largest economy for their disappointing earnings recently.

The strong export data was announced as two days of high-level trade talks between the United States and China began in Beijing. The negotiations are being led by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on the US side, and by Vice Premier Liu He for China.

The negotiators are trying to strike a deal before the start of March, when the US government is due to sharply raise tariffs on $200 billion of Chinese goods. The tariffs already imposed by the two countries last year on huge swathes of each other’s exports have caused major disruptions for businesses and rattled financial markets.

Optimism has been rising among investors that an agreement can be reached. US President Donald Trump said this week he’s willing to stretch his March 1 deadline if it appears the two sides are close to a deal.

Exports to US in decline

While China’s overall exports soared in January, the value of goods shipped to the United States slipped for the second month in a row. Louis Kuijs, head of Asia economics at research firm Oxford Economics, attributed the decline to the new US tariffs imposed on $200 billion of Chinese goods in September.

Chinese exports to the European Union, Japan and Southeast Asia all rose strongly last month.

Those spikes could the result of international companies moving their factories out of China because of the trade war, which means they’re exporting large amounts of equipment to other countries, according to analysts at investment bank ANZ.

“Global manufacturers may have accelerated the relocation of their production bases,” ANZ senior economist Betty Wang said in a note to clients Thursday.

Despite the rebound in China’s exports in January, analysts are skeptical it will last.

Exports may have spiked because Chinese businesses rushed through orders ahead of the Lunar New Year holiday, which fell in early February. The annual holiday, in which the country effectively shuts down for at least a week, came later in February last year.

A slowdown in global growth will weigh on demand for Chinese goods, regardless of whether a US-China trade deal is reached, according to Julian Evans-Pritchard, senior China economist at research firm Capital Economics.

“Even if the latest recovery in trade is genuine, the outlook for this year is still downbeat,” he wrote in a note to clients Thursday.