Top Chinese and US officials raised concerns about each other's trade actions in talks on Friday, days before President Xi Jinping and US President Donald Trump are due to meet at the APEC summit, as new data showed China's trade surplus passing $US1 trillion for the second straight year.
The US Treasury Department said it stressed "the importance of China fully and immediately implementing its commitments" and highlighted "concerns about recent Chinese actions" in what readouts suggested were tetchy talks. Chinese Vice Premier He Lifeng expressed "serious concerns over recent economic and trade restrictive measures imposed by the United States", according to a state media report.
The trade figures, released Tuesday by the General Administration of Customs, showed exports jumped 35.2 per cent year-on-year to $US412.3 billion in October, while imports rose 41.6 per cent to $US307.1 billion. Exports to the United States surged 32.9 per cent last month. The first-10-month surplus reached $US1.04 trillion, passing the $US1 trillion mark earlier than last year, when it was hit in November. China is well on track to surpass last year's record $US1.2 trillion surplus.
The export surge has been driven partly by global demand for AI-related products including computer chips, data centre servers and networking equipment. According to Semafor, soaring fuel prices caused by the Iran war have also helped drive demand, with China's EV and plug-in hybrid exports for October surging 145 per cent year-on-year. The boom has offered Beijing a key economic lifeline as domestic activity is weighed by longstanding woes in the property sector and sluggish consumption.
The APEC summit runs from November 18 to 19 in Shenzhen, where Xi and Trump are expected to meet and could also hold trilateral talks with Russian President Vladimir Putin. The two leaders have navigated a shaky truce in a fierce trade war since their meeting in October last year, recently agreeing to extend the arrangement ahead of talks held in Washington in September.
China's surplus with the European Union widened to $US310.7 billion in January-October, up from $US241.6 billion a year earlier. Talks in Beijing last month between EU trade chief Maros Sefcovic and Chinese counterpart Wang Wentao ended with an agreement to limit exports of hybrid vehicles to Europe. "Trade frictions with the EU have continued to broaden in recent weeks," wrote Nguyen Hoang Nam of Capital Economics, adding that EU steps including 2-euro fees on all packages entering the bloc "so far cover only a small portion of China's exports and are unlikely to have much impact on the economy".
"Exporters have been the key driving force behind China's economy this year," wrote Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. "I expect they will continue to perform well in the foreseeable future," he said, adding that he did not think "China's macro policy stance will change significantly for the rest of the year". Analysts say Beijing is relying heavily on exports to meet its official growth target of 4.5 to 5 per cent this year, its lowest goal in decades, with inflation data on Monday still well short of the official target of around 2 per cent.
Analysis
Why This Matters
- China's export machine is carrying an economy still struggling with a weak property sector and sluggish consumer demand, making the surplus central to whether Beijing can hit its 4.5 to 5 per cent growth target.
- The scale of the surplus, including a 32.9 per cent jump in exports to the US, feeds trade friction heading into the Xi-Trump meeting at APEC, where implementation of past commitments and trade measures are expected to loom large.
- AI demand and higher fuel prices from the Iran war are behind much of the export surge, leaving the surplus sensitive to shifts in global technology spending or energy markets.
Background
China, the world's second-largest economy, has leaned on exports as a growth engine while domestic consumption has stayed soft. The US and EU have responded with tariffs, fees and other barriers to Chinese goods, including electric vehicles and hybrid vehicles. Last month Beijing and Brussels agreed to limit exports of hybrid vehicles to Europe, one of several recent steps to address trade tensions. The APEC summit in Shenzhen brings Xi, Trump and possibly Putin together against the backdrop of a US-China trade war that has been under a shaky truce since the two leaders met in October last year.
Key Perspectives
- US Treasury Department: stressed "the importance of China fully and immediately implementing its commitments" and highlighted "concerns about recent Chinese actions" in Friday's talks.
- Chinese Vice Premier He Lifeng: expressed "serious concerns over recent economic and trade restrictive measures imposed by the United States", according to a state media report.
- Zhiwei Zhang, Pinpoint Asset Management: says exporters have been the key driving force behind China's economy this year, expects them to keep performing well, and does not think China's macro policy stance will change significantly for the rest of the year.
- Nguyen Hoang Nam, Capital Economics: says trade frictions with the EU have continued to broaden in recent weeks, but recent EU steps cover only a small portion of China's exports and are unlikely to have much impact on the economy.
What to Watch
- The Xi-Trump meeting, and any trilateral talks with Putin, at the APEC summit in Shenzhen on November 18-19.
- Whether China's full-year surplus beats last year's record $US1.2 trillion, having already passed $US1 trillion by October.
- Whether the EU extends trade measures beyond the hybrid-vehicle limit and package fees, given that current steps cover only a small portion of China's exports.
Checked
12 claims in this story checked against 2 sources: 12 supported.
Show each claim
- SupportedChina’s trade surplus passed $US1 trillion for the second straight year.Just In: “China's trade surplus surpasses $US1 trillion for second straight year.”
- SupportedUS officials raised concerns about Chinese actions during Friday’s talks ahead of APEC.Just In: “The Americans stressed "the importance of China fully and immediately implementing its commitments" and highlighted "concerns about recent Chinese actions", according to the US Treasury Department.”
- SupportedThe US Treasury Department said it stressed “the importance of China fully and immediately implementing its commitments”.Just In: “The Americans stressed "the importance of China fully and immediately implementing its commitments"”
- SupportedHe Lifeng expressed “serious concerns over recent economic and trade restrictive measures imposed by the United States”.Just In: “Chinese Vice Premier He Lifeng expressed "serious concerns over recent economic and trade restrictive measures imposed by the United States", according to a state media report.”
- SupportedChinese exports rose 35.2 per cent year-on-year in October to $US412.3 billion.Just In: “Exports jumped 35.2 per cent year-on-year to $US412.3 billion last month, according to the General Administration of Customs (GAC)”
- SupportedImports rose 41.6 per cent in October to $US307.1 billion.Just In: “while imports expanded 41.6 per cent to $US307.1 billion.”
- SupportedChina’s trade surplus for the first 10 months reached $US1.04 trillion.Just In: “The figures brought China's total trade surplus during the first 10 months to a towering $US1.04 trillion, according to the GAC.”
- SupportedChina reached the $US1 trillion surplus mark earlier than last year, when it was reached in November.Just In: “The country is well on track to surpass the record $US1.2 trillion surplus hit last year, when the $US1 trillion mark was reached in November.”
- SupportedChinese exports to the United States rose 32.9 per cent last month.Just In: “the latest figures show Chinese exports to the United States surged 32.9 per cent last month.”
- SupportedSemafor reported that Iran-war-related soaring fuel prices helped drive demand, and that China’s EV and plug-in hybrid exports rose 145 per cent year-on-year in October.Semafor: “Soaring fuel prices caused by the Iran war have also helped drive demand: China’s EV and plug-in hybrid exports for October surged 145% year-on-year.”
- SupportedThe APEC summit runs from November 18 to 19 in Shenzhen, where Xi and Trump are expected to meet.Just In: “They are expected to hold another head-to-head at the APEC gathering, which runs from November 18 to 19 in Shenzhen”
- SupportedZhiwei Zhang said, “Exporters have been the key driving force behind China's economy this year.”Just In: “"Exporters have been the key driving force behind China's economy this year," Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, wrote.”
