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The Star
5 days ago
- Business
- The Star
China's May exports slow, deflation deepens as tariffs bite
BEIJING: China's May export growth slowed to a three-month low as U.S. tariffs slammed shipments, while factory-gate deflation deepened to its worst level in two years, heaping pressure on the world's second-largest economy on both the domestic and external fronts. The global trade war and the swings in China-U.S. trade ties have in the past two months sent Chinese exporters, along with their business partners across the Pacific, on a roller coaster ride and hobbled world growth. Exports expanded 4.8% year-on-year in value terms in May, slowing from the 8.1% jump in April and missing the 5.0% growth expected in a Reuters poll, customs data showed on Monday, despite a lowering of U.S. tariffs on Chinese goods which had taken effect in early April. Imports dropped 3.4% year-on-year, deepening sharply from the 0.2% decline in April and worse than the 0.9% downturn expected in the Reuters poll. Exports had surged 12.4% year-on-year and 8.1% in March and April, respectively, as factories rushed shipments to the U.S. and other overseas manufacturers to avoid U.S. President Trump's hefty levies on China and the rest of the world. While exporters in China found some respite in May as Beijing and Washington agreed to suspend most of their levies for 90 days, tensions between the world's two largest economies remain high and negotiations are underway over issues ranging from China's rare earths controls to Taiwan. Trade representatives from China and the U.S. are meeting in London on Monday to resume talks after a phone call between their top leaders on Thursday. "Export growth was likely stalled by heavy customs inspections in May due to tightened export control efforts," said Xu Tianchen, senior economist at the Economist Intelligence Unit, noting that rare earth exports nearly halved last month, while electric machinery exports also slowed significantly. Underscoring the U.S. tariff impact on shipments, customs data showed that China's exports to the U.S. slumped 34.5% year-on-year in May in value terms, widening from a 21% drop the previous month. Imports to the U.S. also lost further ground, dropping 18.1% from a 13.8% slide in April. China's May trade surplus came in at $103.22 billion, up from the $96.18 billion the previous month. Other data, also released on Monday, showed China's import of crude oil, coal, and iron ore dropped last month, underlining the fragility of domestic demand at a time of rising external headwinds. Beijing in May rolled out a series of monetary stimulus measures, including cuts to benchmark lending rates and a 500 billion yuan low-cost loan program for supporting elderly care and services consumption. The measures are aimed at cushioning the trade war's blow to an economy that relied on exports in its recovery from the pandemic shocks and a protracted property market slump. China's markets showed muted reaction to the data. The blue-chip CSI300 Index and the benchmark Shanghai Composite Index were up around 0.2%. DEFLATIONARY PRESSURES Producer and consumer price data, released by the National Bureau of Statistics on the same day, showed that deflationary pressures worsened last month. The producer price index fell 3.3% in May from a year earlier, after a 2.7% decline in April and marked the deepest contraction in 22 months, while consumer prices extended declines, having dipped 0.1% last month from a year earlier. Cooling factory activity also highlights the impact of U.S. tariffs on the world's largest manufacturing hub, dampening faster services growth as suspense lingers over the outcome of U.S.-China trade talks. Sluggish domestic demand and weak prices have weighed on China's economy, which has struggled to mount a robust post-pandemic recovery and has relied on exports to underpin growth. Retail sales growth slowed last month as spending continued to lag amid job insecurity and stagnant new home prices. U.S. coffee chain Starbucks said on Monday it would lower prices of some iced drinks by an average of 5 yuan in China. The core inflation measure, excluding volatile food and fuel prices, registered a 0.6% year-on-year rise, slightly faster than a 0.5% increase in April. However, Zichun Huang, China economist at Capital Economics, said the improvement in core prices looks "fragile", adding "we still think persistent overcapacity will keep China in deflation both this year and next." - Reuters
South China Morning Post
09-05-2025
- Business
- South China Morning Post
Chinese exports show resilience in April despite US tariffs
China has defied US President Donald Trump's unprecedented tariff increases by posting stronger-than-expected export growth in April, potentially giving Chinese negotiators an advantage when they hold talks with their US counterparts in Switzerland at the weekend. Advertisement China's April exports beat market expectations and grew by 8.1 per cent year on year to US$315.69 billion, customs data showed on Friday, compared with a 12.4 per cent rise in March. Exports to the United States, however, fell by 21 per cent, the sharpest drop in 21 months, compared with a 9.09 per cent rise in March. 'The export data is a surprise and well above my estimate of 2 to 3 per cent growth,' said Xu Tianchen, senior China economist at the Economist Intelligence Unit, adding that the full impact of US tariffs may not yet be visible in the data but that small businesses in China's coastal cities were already feeling the pinch. Dan Wang, China director at Eurasia Group, agreed that the strong growth was 'quite unexpected'. She said that while the US tariffs might have been expected to put pressure on Chinese production, they had actually created a short-term boost in demand for Chinese intermediate goods. Advertisement 'Even though production in China was halted for some companies, their overseas factories – in places like Vietnam and Cambodia – were working flat out to meet the deadline during the 90-day break [on the imposition of increased US tariffs],' Wang said. 'And whenever they ramp up production, they end up importing high-quality intermediate goods and raw materials from China. So this has actually been a boost for China.'
South China Morning Post
05-05-2025
- Business
- South China Morning Post
China's offshore yuan jumps to 6-month high as rollback of ‘egregious' tariffs seen likely
The offshore yuan strengthened and broke past the 7.2 level against the US dollar for the first time since November, signalling an optimistic shift in market sentiment as hopes of a trade war thaw and fresh demand grows for Chinese assets. Advertisement The recent renminbi gain was largely driven by expectations that the US and China will soon begin negotiating, said Xu Tianchen, senior China economist at the Economist Intelligence Unit, adding that a working-level engagement may have already started, or was about to start. 'We can reasonably expect the two countries to dial down some of their tariffs against each other, as they are egregious and unsustainable,' he said. 'But any negotiations will be quite lengthy and full of uncertainties, bringing volatility to the exchange rate in the process.' Xu added that, despite some rekindled interest in Chinese assets, global investors are far from 'overweighting' them, and they need to see tangible signs that China is capable of comfortably fending off Washington's challenges before they increase their bets. In an interview that aired on Sunday on NBC's Meet the Press, US President Donald Trump said he was 'going to lower [the tariffs against China] at some point, because otherwise, you could never do business with them', adding that 'they want to do business very much'. Advertisement Following a barrage of tariffs imposed by Trump last month, the yuan experienced significant volatility, and China has stepped up efforts to internationalise the yuan amid the escalating trade war with the US. The yuan was under depreciation pressure in the first weeks of April as the world's second-largest economy grappled with the trade war. The onshore yuan once hit a 17-year low by weakening past 7.35 against the US dollar, while the offshore yuan plunged to a record low of 7.4290.
Khaleej Times
09-02-2025
- Business
- Khaleej Times
China's consumer inflation at 5-month high, producer deflation persists
China's consumer inflation accelerated to its fastest in five months in January while producer price deflation persisted, reflecting mixed consumer spending and weak factory activity. Deflationary pressures are likely to persist in China this year, analysts say, unless policymakers can rekindle sluggish domestic demand, with tariffs by U.S. President Donald Trump on Chinese goods adding pressure on Beijing to spur growth in the world's second-largest economy. The consumer price index rose 0.5% last month from a year earlier, quickening from December's 0.1% gain, data from the National Bureau of Statistics showed on Sunday, above the 0.4% rise estimate in a Reuters poll of economists. Core inflation, excluding volatile prices for food and fuel, sped up to 0.6% in January from 0.4% the previous month. Although consumer prices are expected to rise gradually, producer prices are unlikely to return to positive territory in the short term as overcapacity in industrial goods persists, said Xu Tianchen, senior economist at the Economist Intelligence Unit. "If measured by the GDP deflator, it will still take a few quarters to get out of deflation, " Xu said. The numbers were skewed by seasonal factors, as the Lunar New Year, China's biggest annual holiday, began in January this year versus February last year. Typically, prices rise as consumers stockpile goods, particularly food for big family gatherings. Prices of airplane tickets rose 8.9% from a year earlier, tourism inflation was 7.0% and movie and performance ticket prices rose 11.0%. Consumer spending reports over the holidays were mixed, reflecting worries over wage and job security. While Chinese flocked to movie theatres and spent more on shopping, catering and domestic travel, per capita spending during the holidays grew by only 1.2% from a year earlier, versus a 9.4% rise in 2024, analysts at ANZ estimated. CPI edged up 0.7% in January from the previous month, below the forecast 0.8% rise and compared with an unchanged outcome in December. For 2024, CPI rose 0.2%, in line with the previous year's pace and well below the official target of around 3% for last year, suggesting inflation missed annual targets for the 13th straight year. China's provinces have announced 2025 economic growth targets with the average of target prices below 3%, showing that policymakers are anticipating changes and pressures on the price level, said Bruce Pang, adjunct associate professor at CUHK Business School. China's manufacturing unexpectedly contracted in January, while services activity weakened, keeping alive calls for more stimulus. Beijing is widely expected to retain its economic growth forecast of around 5% this year, but fresh U.S. tariffs will put stress on exports, one of the few bright spots in the economy last year. The producer price index declined 2.3% on year in January, matching December's drop and deeper than the forecast 2.1% fall. Factory-gate prices have remained deflationary for 28 straight months. The government is not expected to change monetary or fiscal policy before the annual parliament session in March, said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. "For policymakers, external uncertainty seems to rank higher than domestic economic challenges at this stage," Zhang added.
