China trade surplus with US hits record high

Bloomberg

China’s monthly trade surplus with the US rose to a record in June and exports to the nation also soared, underlining the cause of an escalating trade war between the world’s two largest economies.
The trade surplus with the US was $28.97 billion, the highest in any month in data back to 1999. Exports climbed to $42.62 billion, also a high, the customs administration said.
As the world’s largest exporter, China continues to benefit from robust global demand, but the increase in tensions and trade barriers with the US is weighing on the outlook. Both China and the US imposed 25 percent tariffs on $34 billion of the others’ imports on July 6, and Beijing has vowed to fight back against proposed tariffs on an additional $200 billion in Chinese goods.
“The record bilateral surplus shows exactly that the US economy is robust while that of China is weakening,” said Wang Jian, a Shanghai-based economist at Shenwan Hongyuan Group Co.
“China’s domestic investment is softening due to funding strains, while consumption is not particularly strong either.”
The yuan’s decline in June was the worst in any month since 1994, dropping more than 3 percent against the dollar. While that may help exporters in the longer run, the yuan’s fall now is a sign of growing concern as the trade war arrives at a time when the economy is already slowing.
President Xi Jinping may ultimately have to choose between softening his multi-year campaign to control debt levels, or letting growth dip below the target of 6.5 percent.
Overall exports to all nations rose 11.3 percent in June in dollar terms, while imports climbed 14.1 percent, below a forecast of 21.3 percent, leaving a trade surplus of $41.61 billion. The trade surplus with the European Union rose to the highest level since 2011, while the deficit with Japan shrank.
The trade data comes ahead of the gross domestic product report for the second quarter, which should give a more complete picture of how the world’s second biggest economy did in the first half of this year. That is scheduled for release on Monday.
“Both imports and exports have seen robust growth in the first half as companies front-load orders ahead of the trade war, resulting in nice-looking year-to-date trade data, but the momentum is hardly sustainable in the future,” said Ding Shuang, chief economist of Greater China & North Asia at Standard Chartered Bank Ltd. in Hong Kong, one of the most accurate trade data forecasters this month.
He said China still has solid domestic demand despite the decline in import growth.
Investment, factory output and retail sales growth all slowed in May.