The Wall Street Journal - 09.08.2019

THE WALL STREET JOURNAL. ** Friday, August 9, 2019 |A

exports more attractive.

The shipments to Europe

and Southeast Asia—China’s

top two trading partners—led

July’s bounceback, the customs

data showed, and the decline in

exports to the U.S. earlier in

the year eased after President

Trump and Chinese President

Xi Jinping struck a conciliatory

tone on trade at the Group of

20 summit in Japan in June.

Some economists have sug-

gested the strength in exports

to Southeast Asia this year

was partly boosted by a prac-

tice known as transshipment,

in which Chinese exports are

minimally processed or altered

during a brief stop in a third

country and then re-exported

to the U.S.

U.S. Customs and Border

Protection said it has identi-

fied illegal transshipments of

Chinese goods in recent

months through several coun-

tries, including Vietnam, Ma-

laysia and the Philippines. Data

from China’s customs bureau

Thursday showed double-digit

export growth to these South-

east Asian countries, higher

than the outbound-shipment

growth to all trading partners.

The truce Messrs. Trump

and Xi declared in June evapo-

rated this month after the U.S.

president announced plans for

the new tariffs and China re-

sponded by weakening the

yuan and halting the purchase

of U.S. agricultural products.

The trade dispute has

knocked China from its posi-

tion as the top U.S. trade part-

ner—it now holds the No. 3

spot after Mexico and Canada.

Many economists predict

that exports will slide in com-

ing months as the recent esca-

lation of the trade war sets in,

further denting market and

business confidence.

“While July’s trade head-

lines showed improvement,

China’s foreign trade remains

on the downward trend in

coming months. Weakening

exports will still be the biggest

headwinds for Chinese econ-

omy,” said Larry Hu, an econo-

mist with Macquarie Capital

Ltd.

China’s exports to the U.S.

fell 6.5% in July from a year

earlier, compared with a 7.8%

decline in June, customs data

show. Imports from the U.S. fell

19.1% in July from a year ear-

lier, compared with a 31% drop

the previous month. China’s

Japan Posts Solid

Growth in Quarter

TOKYO—The Japanese

economy grew at a faster pace

than expected in the April-June

quarter as demand ahead of a

sales-tax increase and a 10-day

holiday to celebrate the impe-

rial succession boosted con-

sumption.

The world’s third-largest

economy after the U.S. and

China expanded at an annual-

ized rate of 1.8% during the

quarter, following a 2.8% expan-

sion in the previous quarter,

government data showed.

A poll of economists by

data provider Quick had fore-

cast 0.4% growth.

However, economists say

the latest results don’t mean

that the outlook is rosy.

“Positive growth in the pre-

vious quarter should be dis-

counted,” said Dai-ichi Life Re-

search Institute economist

Yoshiki Shinke.

He said he expected the

economy to have trouble grow-

ing in the coming quarters, as

the tax increase dents con-

sumer sentiment and as busi-

ness confidence suffers from

U.S.-China trade friction.

—Megumi Fujikawa

trade surplus with the U.S. also

narrowed, totaling $27.97 bil-

lion in July compared with

$29.92 billion in June.

Exports accounted for

about a third of the economy

during the first decade of this

century when China became

the world’s factory. While reli-

ance on exports has fallen in

recent years, the economy’s

faltering during the past year

is challenging Beijing’s efforts

to rely on consumption as a

new driver for growth.

Imports fell 4.5% over the

first seven months of the year,

reversing strong growth of

15.8% in 2018. Slack demand at

home has shrunk domestic

consumption’s contribution to

economic growth and boosted

the position of net exports,

which accounted for more

than a fifth of growth in the

first half.

As the domestic economy

faces more downward pres-

sure later this year, Mr. Hu

said Beijing will have to step

up stimulus measures and

consider softening its stance

on trade issues.

“Cutting interest rates in

any form will be a choice for

policy makers to substantially

lower financing costs for the

real economy,” he said.

—Grace Zhu

WORLD NEWS

BEIJING—Chinese exports
rebounded in July, buoyed by
increased shipments to Europe
and Southeast Asia, but econo-
mists expect the turnaround to
be short-lived as Beijing and
Washington escalate their
trade battle.
The 3.3% rise in exports
compared with a year earlier
reverses a 1.3% decline in
June, data from the General
Administration of Customs
showed, and marks a sign of
vitality for a sector challenged
by the trade fight with the U.S.
and often lackluster global de-
mand. Exports barely grew
over the first seven months of
the year, creeping up 0.6%
from the year-earlier period.
Reviving exports has be-
come a priority for China’s
government, which is trying to
steady an economy that has
been losing steam for the past
year, as demand from busi-
nesses at home dried up due
first to a credit squeeze and
then concerns about the trade
fight.
To boost exports, China has
been steadily weakening its
currency since trade tensions
broke out with the U.S.
But in a sign of domestic
weakness, imports continued
to slump in July, sliding 5.6%
from a year earlier.
After the Trump administra-
tion last week threatened to
impose tariffs on $300 billion
in Chinese goods that are cur-
rently not subject to levies,
China’s central bank this week
allowed the yuan to depreciate
below 7 yuan per dollar, a level
not seen since 2008.
On Thursday, the bank fur-
ther weakened the yuan by set-
ting a daily anchor for trading
in the currency below the 7
mark. The move sets the stage
for an even weaker yuan, which
economists say could offset
some of the impact of higher
U.S. tariffs and make Chinese

China Exports Stage Surprising Recovery

Rising shipments to

Europe and Southeast

Asia offset fall to U.S.,

though outlook is dim

Women worked recently in a silk clothing factory in Shengze, Jiangsu province. Chinese exports rose 3.3% in July from a year earlier.

ALEKSANDAR PLAVEVSKI/EPA/SHUTTERSTOCK

Turnaround

ShipmentstotheEUand

SoutheastAsiahelpedboost

China'sexportsinJuly,as

goodstotheU.S.declined.

Changefromayearearlierin

China'sgoodsexportsto:

*Association of Southeast Asian Nations

Source: China's General Administration of

Customs via CEIC Data

0

10

20%

Jan. 2019 March May July

EU Asean* U.S. World

NY

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