China’s imports and exports took a tumble in October, but still surpassed growth estimates to put the world’s second largest economy at ease. The country is currently trying to settle an interim trade agreement with the US.
Customs data showed on Friday that Chinese exports dropped by 0.9% from 2018 for the third consecutive month. Forecasts were a 3.9% slip while in September there was a 3.2% fall.
Imports also slipped 6.4% from the previous year in October to mark the sector’s sixth straight month of decline.
Economists had expected to see a contraction of 8.9% following an 8.5% stumble registered a month earlier.
This left the country with a trade balance of $42.81 billion last month. This is higher than analysts’ estimates of $40.83 billion and the $39.65 billion posted in September.
Potential Rollback on US, China Tariffs
Existing tariffs, including the new ones at the beginning of September, have taken their toll on outbound shipments.
They also come with the continued shrinking of demand across the world, according to analysts.
The import numbers are in line with the readings on weak performance in the manufacturing sector and bleak producer prices.
Such slowdown indicates lingering weakness in domestic demand and the minimal impact of monetary policy so far.
The Chinese economy is expanding at a slower rate amid the long-drawn-out trade dispute between Beijing and Washington.
Despite a market-beating trade data for October, outlook in the coming months seemed downbeat, according to China economist Martin Rasmussen.
Looking ahead, Rasmussen sees subdued global growth to continue weighing on exports.
Offsetting Headwinds
The headwind is unlikely to be fully offset by the proposed partial rollbacks of tariffs. The recent appreciation of the renminbi means the exchange rate will act as less of a prop to outbound shipments.
The two countries have been engaged in a trade dispute for 16 months. But the prospect of an initial deal being signed soon have grown recently.
Previously, the sides spoke of progress in discussions last week.
Officials from Beijing and Washington stated on Thursday that the US and China have agreed to lift existing trade tariffs on each other’s goods. The move is part of the Phase One deal.
The Chinese Commerce Ministry also said Beijing accepted Washington’s plans to withdraw the duties between the two parties in phases.
Still, even with a first phase trade deal, China might not be able to improve exports and manufacturing, economists said.
That could call for an additional stimulus from Beijing to keep its economy from facing a steeper downturn.
Moreover, news of the meeting between President Donald Trump and Chinese President Xi Jinping possibly getting postponed until December delays the opportunity to seal a partial trade accord right away.
Experts have warned about the risk of a deal falling apart as well.
A lot of work still needs to be done, US officials said.
