Open questions | Economist Jin Keyu on why the trade war is still a ‘gift for China’
Jin Keyu of the London School of Economics says the frequently invoked ideas of a ‘middle-income trap’ and ‘overcapacity’ are overblown.
Jin Keyu is a Harvard-trained economist currently serving as an associate professor at the London School of Economics. In The New China Playbook: Beyond Socialism and Capitalism, Jin argues China’s system remains well-positioned to resolve the problems weighing down its economy, and that calls for the country to adopt a model more attuned to the West miss several qualities that have been essential to its success.
I think the West misunderstands Chinese aspirations, the Chinese developmental model and the Chinese people. I think there’s an under-emphasis on cultural differences and, to a certain extent, differences in people’s preferences and values. If we only take one lens to look at the entire world, then - more often than not - we will get it wrong.
I think part of my job, or the job of many others with similar multicultural backgrounds, is to reduce these misgivings by showing the other side of China from the inside, a way of life that may not be apparent from the headlines of Western media.
Open questions | More talk ‘not always best’ for US-China relations, it’s results that count, expert says
Taiwan is actually the most stable issue between Beijing and Washington, as long as the one-China policy exists, distinguished expert says
I’ve repeatedly emphasised that establishing communication channels between China and the US – no matter how frequent or senior level – is one thing, while producing tangible results is another.
Explainer | Can China’s export momentum last? 5 takeaways from August trade data
China’s exports rose 8.7 per cent from a year earlier in August, while imports were up by 0.5 per cent
1. Exports buck trend, hit 17-month high
Year-on-year export values in August grew at the fastest pace in 17 months, and export volumes hit record highs, according to Zichun Huang, China economist at Capital Economics.
“Exports remained strong in August,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management. And ING’s chief economist for Greater China, Lynn Song, said “exports defied expectations”.
“While trade data is difficult to forecast, the upside miss is still notable as the direction was different than expected,” Song said.
“Official data has managed to buck this trend for at least August, as exports picked up at a 2.7 per cent month-on-month pace.”
Song also pointed to an “encouraging and somewhat surprising development” as auto exports rose in August, which brought year-on-year, year-to-date growth to 20 per cent from 18.1 per cent in July.
2. Imports ‘tepid’
China’s imports rose by just 0.5 per cent from a year earlier in August, compared with the 7.2 per cent growth seen in July, and they surprised on the downside, according to Zhang at Pinpoint Asset Management.
Huang at Capital Economics said a higher base for comparison played a role, but import volumes also declined, month on month.
“A less surprising development was on the side of imports. Import growth came in a little lower than forecast, slowing to a tepid 0.5 per cent year-on-year growth level,” said Song at ING.
He added that “import growth remains very uneven”, with the categories seeing strong year-to-date, year-on-year growth primarily tied to national strategic priorities, with automatic-data-processing equipment, semiconductors and hi-tech imports leading the way.
But “other categories have been fairly weak throughout the year”, Song said, pointing to steel, cosmetics and agricultural imports.
3. ‘Positive news’ for trade balance
China’s August trade surplus stood at US$91.02 billion, compared with US$84.65 billion in July.
“The faster-than-expected export growth and larger-than-expected slowdown of imports led to a larger trade surplus of US$91.02 billion in August,” Song said.
“This positive news comes after disappointing data releases in the last month.”
4. Partners
China’s exports to the Association of Southeast Asian Nations rose by 8.78 per cent in August compared with a year earlier, while exports to Russia rose by 10.37 per cent.
Shipments to the United States increased by 4.94 per cent, representing a third straight month of positive growth, while shipments to the European Union rose by 13.39 per cent.
Shipments to the EU marked their highest export growth in two years. July 2022 saw a growth rate of 23.17 per cent.
5. Exports to remain strong in the coming months?
Huang at Capital Economics expects China’s exports to remain robust in the near term, supported by a decline in China’s real effective exchange rate.
“But this won’t significantly impact overall export performance. The tariffs target only a small portion of China’s outbound shipments, and their effect can be mitigated via trade re-routing and exchange-rate moves.”
He also expects imports to rebound in the near term, after having fallen by volume last month.
“A third of imports are intermediate goods used in the export sector. And a pickup in fiscal spending over the remainder of the year is likely to boost construction activity and increase demand for industrial commodities,” he added.
Strong exports may delay the adjustment in fiscal policy toward a more proactive stance
But Zhang at Pinpoint Asset Management questioned how long China’s exports could remain strong given the weakening US economy and the rising trade tensions.
“China’s economy continues to show diverging trends with weak domestic demand and strong export competitiveness, both reflecting the domestic deflationary pressure,” he said. “Strong exports may delay the adjustment in fiscal policy toward a more proactive stance.”
And Song at ING said it remained uncertain whether China’s export momentum could last.
“Aside from incoming tariffs and the sluggish export-orders data of the last few months, if global growth momentum begins to slow too, this could also drag export momentum,” Song added.
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