China’s trade has expectedly slowed in January as per a recent survey which was conducted by Reuters wherein it is slated to show a significant fall in both imports and exports for a second consecutive month. The survey has led to growing concerns of an impending slowdown as being the biggest trading nation of the world the extent of fall will be a major concern for the global nations and policymakers. The slowdown has already increased the anxiety among international investors due to fears of cooling global demand.
The imports have shown a sharp fall to the extent of 10 percent in January when compared to 2018. This is seen as the biggest fall since 2016. The figures are suggested by a recent poll undertaken by Reuters where nearly 30 economists were consulted. The figures are also a warning sign that the Chinese economy is slowing at a pace much faster than expected. The scenario is mostly the same even for the exports which also contracted in January, as the outbound shipments also fell 3.2 percent than a year before. The decline of the previous month was 4.4 percent.
In the latest effort to bring an end to the on-going trade war between the two largest economies of the world, China and the US have begun talks on Monday in Beijing. Negotiators are making all efforts to reach an agreement ahead of the March 1 deadline finally. US has already announced that the US tariffs on Chinese imports worth $200 billion will increase to around 25 percent from the present value of 10 percent. Many international experts feel that the most probable outcome of the talks will be a possible suspension of the announced hike in tariffs from March 1. The current pressure on the Chinese imports will continue to remain and will not be changed in order to keep the Chinese exporters under pressure, at the same time putting-off a major blow in the near time.
The whole set of events have had a great impact on the trade surplus of China which has also come down to $33.5 billion in January from a high of $57.06 billion in December. Experts have already issued advisories that all economic data from China in the first two months of the year should be dealt with care mainly because of the disruptions in business caused by the ill-timings of long holidays due to the Lunar New Year. Latter which had begun in mid-February in 2018, started on February 04 in 2019.
The lowest forecast for imports for January is a drop of 20.1 percent. This has largely been a by-product of the on-going trade war between US and China which had hit domestic demand in China as the two nations imposed reciprocal tariffs on each-others exports in the early months of 2018 although there was decline recorded previously as well. Business financing costs have gone up due to risky practices of lending and debt. Access to easy credit has also been throttled thereby hitting many businesses which are run on a private basis. This is also due to a regulatory crackdown spread over many years. The factors have also brought down the investment growth. It is generally seen that the reduction in imports is primarily brought in the technology industry thereby severely hurting the interests of South Korea and Taiwan, both of which have huge exposure to China and technology. The drop in demand in China has led to a grave fall in orders from China to Taiwan in December while the same reason led to a drop in exports from South Korea to China for a second consecutive month in January after December 2018. The prices of memory chips took a severe beating in the whole process.
Thus, such sharp and weak trends could have serious repercussions for the annual meeting of the Chinese Parliament due in March this year. It can definitely raise the prospects of the possibility of China considering intensification of its stimulus efforts. China had already taken many steps to lift the falling demand and control the effect of other international factors. The measures were regarded as insufficient when compared to other such steps taken by the Chinese before. In an effort to boost the domestic demand, various policy-makers have been pushing the infrastructure projects in addition to slashing the tariffs on imports. Despite these measures, it had been predicted that the economy would take time to stabilize. The state newspaper has also stated that the full-year GDP will maximally expand till 6.3 percent.
China and the US have been locked in a consistent trade war since 2018 where both the economies are reciprocating tariffs on each other. The outcome has crumpled the Chinese economy by leaps and bounds while the effect on the US economy is not very pronounced. Both the nations have finally decided to hold talks on the same as the deadline given by the US to further increase the tariffs nears. The US has given the March 01 deadline to China for imposing revised and higher tariffs on Chinese imports. Investors and experts have expressed concerns about the possible fall-out of the same on the global economy. There are obvious signs of a slowdown in the Chinese economy which cannot be brushed aside. To add to the woes, the businesses in China also had to face the untimely holidays of the Lunar Year which had actually set in earlier than last year. The talks which had begun earlier this week have brought an air of positivity as Asian stocks are trending positive. President Trump has expressed great hope for the talks and has also stated that he may even delay the deadline if the talks are going in the right direction. He also, however, has said that he finds the possibility of resolution of all the contentious issues very thin. He also stated the need for President Xi Jinping’s involvement in the talks for a final agreement to be reached.