China Must Stimulate as its Economy Sharply Weakens

China Must Stimulate as its Economy Sharply Weakens

China’s exports unexpectedly fell in August as shipments to the United States slowed sharply, pointing to further weakness in the world’s 2nd-largest economy and underlining a pressing need for more stimulus as US-China trade tension escalates.

Beijing is widely expected to announce more support measures in coming weeks to avert the risk of a sharper economic slowdown as the United States ratchets up trade pressure, including the 1st cuts in some Key lending rates in 4 years.

Friday, the PBoC cut banks’ reserve requirements for a 7th time since early Y 2018 to free up more funds for lending.

August exports fell 1% from a year earlier, the biggest fall since June, when it fell 1.3%, customs data showed Sunday. Analysts had expected a 2.0% rise in a Reuters poll after July’s 3.3% gain.

China let its currency slide past the Key 7 per USD mark in August for the 1st time since the global financial crisis in 2007-08, and Washington labeled it a currency manipulator.

Among its major trade partners, China’s August exports to the United States fell 16% Y-Y slowing sharply from a decline of 6.5% in July. Imports from America slumped 22.4%.

Many analysts expect export growth to slow further in coming months, as evidenced by worsening export orders in both official and private factory surveys.

More US tariff measures will take effect on 1 October and 15 December

Exports to Europe, SKorea, Australia, and Southeast Asia (ASEAN) also worsened on an annual basis, compared with July, while shipments to Japan and Taiwan posted slightly better growth than the previous month.

Sunday’s data also showed China’s imports shrank for the 4th month running since April. Imports dropped 5.6% on-year in August, slightly less than an expected 6.0% fall and unchanged from July’s 5.6% decline.

Sluggish domestic demand was likely the main factor in the decline, along with softening global commodity prices. China’s domestic consumption and investment have remained weak despite more than a year of growth boosting measures.

China reported a trade surplus of $34.84-B last month, compared with a $45.06-B surplus in July. Analysts had forecast a surplus of $43-B for August.

Last Thursday, China and the United States agreed to hold high-level talks in early October in Washington.

White House economic adviser Larry Kudlow said Friday the United States wants “near term” results from US-China trade talks in September and October but cautioned that the trade conflict could take years to resolve.

China is losing the ‘Trade War” with the US, America First!

Have a terrific week.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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