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A week from Donald Trump assuming the US presidency, data from the country he’s called a trade cheat and threatened to label a currency manipulator show China’s trade surplus with both the world and the US actually shrank last year.
China’s overall trade surplus — which represents demand borrowed from other nations in a zero-sum interpretation of international economics — shrank 14 per cent in 2016 to $512.9 billion, down from a record in 2015 and the first drop in five years, customs data showed Friday. Against the US, the surplus dropped to $254 billion from $260 billion even as the yuan fell 6.5 per cent against the dollar, the most in more than two decades.
Challenges for the world’s largest exporter are mounting as protectionism reshapes global politics and economics, with Trump’s impending inauguration fueling the uncertainty. Somewhat overlooked amid the angst: China’s epochal shift toward consumption and services and away from dependence on smokestack industries and cheap exports makes it less reliant on external demand and is helping shrink the global imbalances of the past.
“A lot of the accusations Trump has made were more relevant 10 years ago,” said Julian Evans-Pritchard, an economist at Capital Economics in Singapore. “China now has an over-valued currency. That’s sort of hurting its own exports but helping it to unwind some of the previous imbalances, and it means that China is contributing more to global demand. “
Indeed, while Trump accuses China of manipulating its currency to keep it weak and therefore boost exports, the nation’s central bank has actually been spending billions of dollars to prop up the yuan. Policy makers in Beijing have also tightened capital controls to prevent an acceleration of the fund exodus since August 2015.
“China’s exports are losing competitiveness,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co in Hong Kong. The shrinking surplus is a result of rising oil prices and higher manufacturing costs, and the 2017 surplus will be little changed from 2016, he said.
Friday’s data show shipments fell for a ninth straight month in December, dropping 6.1 per cent from a year earlier. Imports rose 3.1 per cent to leave a $40.8 billion trade surplus for the month.
China will closely monitor US trade policy after Trump takes office, customs spokesman Huang Songping said at a briefing in Beijing, citing global trends toward populist policies.
“The political landscape is changing significantly,” Huang said. “Brexit, elections in major European countries, the new president in the U.S. and the election in South Korea will all bring uncertainties to the current policies, and may add to the global protectionism trend.”
Trade still faces large uncertainties this year amid a complicated global context and downward pressure on the economy is “still big,” Huang said. Higher costs reduce trade advantages and market share is being lost to Southeast Asian nations, he said.