Daily Management Review

Reuters Poll Suggest Drop In China June Exports


07/11/2019




Reuters Poll Suggest Drop In China June Exports
According to the outcome of a Reuters’ poll, the second largest economy of the world – China, has been impacted by weakening global demand and a sharp hike in U.S. tariffs and its exports for June likely had dropped. 
 
If the poll results turn out to be true, it would be the second straight month that China would be reporting a fall in exports, which would indicate a continued weakness in domestic demand in the country and thereby underscoring the need for China to implement more measures for economic support.
 
If the data from China, likely to be released on Friday, is similar to or worse than the poll results, it could be a cause of concerns over a greater than expected slowdown in the Chinese economy as well as over increased risks of a global recession. 
 
Last week, export forecast for the current year as well as its economic growth target was slashed by South Korea. The new predicted economic growth rate would be a seven-year low if true midst a dragging US-China trade war which is hitting global demand.
 
According to the median estimate of 34 economists in a Reuters poll, there is an expected decline of 2 per cent year on year in June exports of China compared to a 1.1 per cent fall in the earlier month in May. June was the first month that the increased US tariffs on Chinese products worth $200 billion was in force.
 
Survey of a factory activity also showed the shrinking of export orders last month which would indicate further weakening of the economy in the third quarter.
 
According to some analysts, the sudden and unexpected increase in the shipments in May was because Chinese exporters were attempting to rush their products into the US in order to avoid the increase import tariffs by the US administration on Chinese goods.
 
A decision to resume stalled trade talks between the United States and China was taken at the end of last month after agreement between the US president Donald Trump and his Chinese counterpart Xi Jinping at the sidelines of the G20 Summit in Japan. Trump also offered some concessions including postponement of additional and new tariffs on Chinese goods as well as easing of some of the restrictions imposed by the Trump administration on the Chinese tech giant Huawei. The talks are slated to start this week according to reports.
 
While announcing the thawing of ice in Japan, Trump had then said that more purchase of US agricultural commodities would be made by China and in return some export restrictions on Chinese telecom equipment giant Huawei Technologies would be made by the US.
 
However, according to reports quoting sources, analysts and China trade watchers in Washington, the agreement between the two leaders in Japan did little to resolve the major sticking point between the two parties that resulted in talks being stalled earlier in May.
 
According to reports, a section of Chinese exports have denied their American importers covering up for additional costs because of the increase in US tariffs from 10 per cent to 25 per cent even though they had earlier agreed to absorb the shock of imposition of the 10 per cent tariffs.
 
And according to the Nikkei reported last week, plans to shift substantial production out of China are being made by a number of major US based technology companies including HP Inc, Dell Technologies, Microsoft Corp and Alphabet Inc. reports also suggested that parts of their supply chains have already been moved out of China into their home country by some manufacturers in Taiwan.
 
(Source:www.reuters.com)






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