China’s export bases stand firm in trade war with the United States … for now

China’s two economic powerhouses, Guangdong and Zhejiang provinces, reported only modest slowdowns in economic growth for the first three quarters as they weathered the first wave of a trade war, according to official data released by the two authorities.

Gross domestic product for Guangdong in the Pearl River Delta in China’s southeast grew by 6.9 per cent during the first three quarters of 2018 from a year ago, a rate slightly higher than the nationwide growth rate of 6.7 per cent for the same period, according to official data.

In the same period last year, Guangdong’s growth rate was 7.1 per cent.

In eastern China, in the Yangtze River Delta, Zhejiang province – another export hub – reported economic growth of 7.5 per cent, the provincial government said on Monday. That compares to 7.6 per cent in the same nine-month period last year.

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The relatively sound growth of the two provinces, which jointly accounted for nearly 40 per cent of China’s total exports, is evidence that the first round of the trade war between China and the US has yet to generate a significant impact on the world’s second-biggest economy.

In fact, Guangdong said its exports, in terms of year-on-year growth, had rebounded in the third quarter, turning around a fall of 3.3 per cent in the first half of the year to a modest rise of 0.4 per cent in the January-September period.

While Guangdong’s official purchasing managers’ index fell to 49.3 in August, stirring concerns about contraction in the economy, but rebounded to 50.2 in September. A reading of 50 marks the point between expansion and contraction.

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Overseas shipments from Zhejiang increased by 9.7 per cent during the first three quarters, accelerating from a 6 per cent growth in the first half of the year, according to the provincial statistics authority’s data.

Wang Meifu, chief accountant of the Zhejiang statistics bureau, said on Monday that a strong global economy had helped local export businesses. Like China as a whole, only a fifth of the province’s exports were destined for the US, he said, adding that “the total global trade demand is still big, we will have the market as long as there is demand”.

At the same time, the 6.9 per cent growth rate in Guangdong was the first time the province reported growth below 7 per cent in nearly a decade. The local statistics bureau issued a statement saying the province’s economy was facing growing challenges.

China’s nationwide economic growth decelerated to 6.5 per cent in the third quarter, the lowest reading since 2009.

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Xinhua published an editorial on Monday arguing that it was “short-sighted” to read a modest slowdown as an omen of crisis in the Chinese economy. It said it was also wrong to guess that Beijing had run out of ammunition to fight a trade war with the US.

“It is not workable to only stare at the GDP figure … China has a big market with a population of more than 1.3 billion, a labour resource of more than 900 million and the advantages of infrastructure and the full industry chain,” the article said.

The US has levied import duties on US$250 billion worth of Chinese products, or about half of Chinese imports, in a gradually escalating trade war, which officially started in early July.

Analysts have previously said that the tariffs, and threats of further levies, may have pushed Chinese exporters to “front load” their shipments, meaning Chinese exporters are trying to make deliveries to the US before more tariffs kick in.