Exports keep China's economy warm, but winter is approaching
Exports keep China's economy warm, but winter is approaching
US customers of Ningbo Frank Electric Co., a Chinese manufacturer of boilers and other appliances, have been placing orders several months in advance, said salesman John Zheng. "Everything looks so good right now," he said. "But it will not continue."
China issued a gloomy report on Friday on the performance of its economy, with an economic growth rate that slipped to 6.5% in the third quarter, the slowest pace since the global financial crisis. Just before the launch, and after Chinese stocks fell 3% on Thursday, taking the losses to almost 25% Since the beginning of the year, all the main financial regulators of the country published comments to calm investors.
The rare joint effort was followed by an interview published by the official Xinhua news agency with China's economic czar, Deputy Prime Minister Liu He, who downplayed the impact of the trade dispute and suggested that low share prices represent an opportunity to purchase.
"This shows how worried they are about the economic outlook and the bearish across the market," said Zhou Hao, senior emerging market economist at Commerzbank.
For months, China's economy has been declining, with a variety of measures that include fixed assets, car sales and loosening of retail sales. Meanwhile, firms have been preparing for US tariffs on Chinese products to reach their final point. This does not seem to have happened yet, as American companies have accumulated purchases before the rates. The usual burst of orders before the American holiday season has also helped.
Chinese exports grew at an average monthly rate of 11.7% during the third quarter, which encouraged the weak performance of the economy. "Thanks to the anticipated distribution, the negative impact of the trade dispute with the United States is limited until now," said Grace Ng, an economist at
But Washington has He said he will raise the rates. about $ 200 billion in Chinese products to 25% next year, up from the current 10%, and is threatening to impose tariffs on an additional $ 257 billion of Chinese products. Analysts say it's only a matter of time before the run of early orders fades and customers begin to cancel purchases altogether.
Macquarie Capital Ltd. estimates that the growth of Chinese exports will slow to between 5% and 10% in the coming months. Ms. Ng from J.P. Morgan predicts that exports will begin to weaken in 2019, which will cause overall economic growth to reach 6.1% next year.
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It is the biggest challenge since we established 15 years ago, even bigger than the 2008 crisis.
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At the annual China Import and Export Fair in the southern city of Guangzhou this week, thousands of Chinese vendors showcased their products, including electrical appliances, lighting, building materials and hardware. Potential sellers flooded the exhibition halls of the Canton Fair, as is known, suggesting health for world trade still.
But many Chinese companies that depend on the US market are worried about the difficult days that await them. US customers of RainMin Illumination Ltd., a manufacturer of LED bulbs that appear in the lighting installations on display at SeaWorld theme parks and at festivals such as Burning Man and Coachella, rejected orders and sent an email to discuss whether the company will lower its prices.
"It's the biggest challenge since we established 15 years ago, even bigger than the 2008 crisis," said Liu Xiaoyan, one of the firm's managers.
Mr. Liu enthusiastically exchanged business cards with prospective buyers from India, but once they left, he regretted that his market has not developed enough to demand the kind of large installation projects that LED light bulbs serve. the company. "It's impossible this time."
Is China's export engine about to run out of steam? In the photo, a worker from the Yangzijiang Shipbuilding Group shipyard in Jiangyin, Jiangsu Province, China, on October 18.
Photo:
aleksandar plavevski / epa-efe / rex / Shutterstock
At a stand selling wine coolers, Lu Tao was concerned that the income of his family business could fall by up to 40% this year. He said he plans to start selling directly to US consumers. UU On the Chinese e-commerce website Taobao, eliminating American distributors. The higher prices he could charge would offset the costs of the fees. "A refrigerator that I sell for $ 300 can now cost $ 1000," Lu said.
Analysts expect Chinese leaders to move to boost growth if exports, investment or consumption weaken too much. Maintaining the economy at a steady and relatively fast rate is considered crucial for the Communist Party to maintain social stability. Beijing has stimulated the economy again and again through fiscal and monetary measures, and in recent months has given more liquidity to financial markets, while allowing the Chinese yuan to depreciate to help Chinese exporters. Policy makers have also successfully urged local governments to issue more bonds, hoping they will spend again on projects.
Chinese and American companies are maneuvering to soften the blow of the trade struggle. At the export fair, some Chinese suppliers said they could offset some reduction in US orders. UU Selling to other countries Others boasted that their customers were already thinking of ways to redirect the shipment through Taiwan, Mexico and other places that are not subject to higher rates in the US. UU A common argument: China is still number 1 in the world in offering well-made products at competitive prices.
Still, analysts say that China's economy can not avoid the headwinds, as the commercial struggle slows business confidence. They are not optimistic that tensions between the two countries will ease, even as President Xi Jinping and President Trump prepare to meet at the end of November.
Sandi Kegebein had traveled to Guangzhou from Wisconsin in search of Chinese products for his supply company, SC Global Sourcing Inc. His company has already placed orders next spring. "We are buying everything we can," said Kegebein. In the event that higher rates are applied, he said, the company can switch to buying products that are already in the US stores.
-Lingling Wei and Grace Zhu contributed to this article.
Write to Chao Deng in Chao.Deng@wsj.com
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