China Govt Official Says Trade Surplus Has Peaked

21st Century: 5月中国外贸超预期增长8.6% 未来贸易顺差将缩减

Bai Ming, deputy director of the Institute of International Market Research of the Ministry of Commerce, told reporters in the 21st Century Business Herald that the trend of the national economy was largely in sync with the foreign trade data in May. "This speed is not the same as the decline in the previous two years, but it is also different from last year's substantial recovery. It is a normal, steady increase."

Relatively speaking, the import growth rate in May was significantly higher than the growth rate of exports. Prior to this, according to statistics from the Statistics Bureau, China's manufacturing PMI rose by 0.5 percentage points from the previous value to 51.9% in May, setting a high point since October 2017, indicating that the current economic momentum has accelerated slightly, and economic development has boosted domestic demand. This in turn led to an increase in imports.

Bai Ming stated that the Chinese government announced major tariff reduction measures in May, not only drastically cutting down auto import tariffs, but also lowered the import tariff rates on daily consumer goods involving 1,449 tax purposes, with an average drop of 55.9%. This helps import growth.

According to Bai Ming, at this stage, China overflows with more trade opportunities and its import speed is faster. He pointed out that the above-mentioned tariff measures are all started in July, and many import requirements in May and June may be postponed until July, and China will also hold an international import expo in the second half of the year. It is expected that in the coming period, import growth will be faster than export growth will become a normal state. This also shows that China has never deliberately pursued a trade surplus and is striving to achieve trade balance.

Deng Haiqing, chief global economist of Kyushu Securities, also believes that the import growth in May exceeded market expectations, mainly related to the continued increase in import policy. In May, exports fell from their previous values, and the impact of Sino-U.S. trade frictions on exports gradually emerged. Exports in 2018 could hardly continue the “brighter eye” performance of 2017.

He said that the trade surplus has continued to narrow, and there has been a clear long-term decline in China's trade surplus, which will have a certain impact on GDP growth.

In terms of trade structure, general trade has grown rapidly and its share has increased. In the first five months, China’s general trade import and export amounted to 6.84 trillion yuan, an increase of 12.7%, accounting for 58.8% of the total value of foreign trade, which was an increase of 2 percentage points over the same period of last year. In contrast, the import and export of processing trade accounted for 26.5%, down 1.9 percentage points.

Bai Ming stated that general trade is the direction that China encourages development. It can carry more elements such as technology and brands, and is the main direction for the transformation and upgrading of foreign trade. In the past, China's processing trade has been at the middle and low end of the industry chain for a long time, and its added value is low. Nowadays, some of these processing trades are transferred overseas, and the other part is transformed in China to higher value-added general trade.

...Bai Ming stated that there is great uncertainty in Sino-US economic and trade relations in the future. The United States may initiate trade sanctions against China. If so, China will launch an equal trade countermeasure against the United States, which will cause many variables in Sino-US trade. "Now most long-term or unfulfilled orders in Sino-US trade have mostly chosen to wait and see in order to avoid risks; but some companies will choose to grab exports before the tariffs are landed."