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China-US relations

China’s trade surplus with US hits second highest on record ahead of Donald Trump’s visit

US president due to arrive in Beijing on Wednesday afternoon, with trade a constant source of friction between two nations’ governments

PUBLISHED : Wednesday, 08 November, 2017, 12:36pm
UPDATED : Thursday, 09 November, 2017, 10:26am

China posted the second highest monthly trade surplus of US$26.6 billion with the United States in October, hours ahead of Donald Trump’s first visit to China as US president.

Trump arrived in Beijing on Wednesday afternoon with a trade delegation that included business chiefs from companies including Goldman Sachs and Boeing.

Trade is expected to be one of the main topics of discussion during the three-day trip, which the Chinese have described as a “state visit plus”.

US-bound sales of Chinese products rose 8.3 per cent year to US$37.8 billion last month compared with the same month last year, China’s customs bureau said in a statement on Wednesday. Purchases of American goods increased 4.3 per cent to US$11.1 billion.

China’s overall exports jumped 6.9 per cent to US$189 billion, while imports rose 17.2 per cent to US$150.8 billion.

The trade surplus with the US accounted for 70 per cent of the country’s total surplus in October and nearly two-thirds of the total so far this year, according to customs data.

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“Continued solid exports to the US may add to US-China trade tensions,” Louis Kuijs, chief Asia economist of Oxford Economics, wrote in a briefing note.

“The Trump administration remains deeply unhappy with the US-China trade and investment relationship”, Kuijs added. He estimated that the trade deficit, measured using US methodology, will rise to US$370 billion this year from US$ 347 billion in 2016.

China’s official statistics put the trade gap with the US at US$254 billion.

Although some business deals will be announced during the visit, “the US administration will remain eager to show results of some kind on the trade deficit. This could include more protectionist measures against Chinese exports”, Kuijs wrote.

Trump has long accused Beijing of building up a huge trade surplus through unfair trade policies and threatened high tariffs on Chinese products during his presidential election campaign.

Trump’s stance softened after he met Chinese President Xi Jinping in Florida in April, with a one-year trade plan to tackle the trade imbalance.

Beijing announced in May it would open up its markets to products including American beef and liquefied natural gas imports and US rating agencies. China has also repeatedly called for the US to lift a ban on some high-tech products sales to China.

Trump has kept up pressure on China, including a starting an investigation into allegations of intellectual property theft by Chinese firms against US companies.

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Iris Pang, chief Greater China economist of ING, said the trade imbalance derived from the different structure of the two economies and that could not be solved in the short term.

She said the United State should not focus on merchandise trade figures, which is just one of the many dimensions to their relationship.

For instance, service trade was worth about US$14 billion to America in the second quarter of this year alone.

American businesses may also find a way to penetrate deeper into the Chinese market in sectors such as asset management.

Timothy Stratford, former assistant US trade representative for China affairs, said: “I’m optimistic that there will be some very good outcomes from President Trump’s visit, including some good business deals to be signed between companies from the two countries.

“Energy will be a big one [for economic cooperation],” Stratford said in an interview last week.

“Trade, investment, infrastructure and energy are four sectors where China and the US share common interests and are likely to cooperate,” said Wang Huiyao, president of the Centre for China and Globalisation, a Beijing-based think tank.

“Especially, we can do something in energy where the US has excess production but China heavily relies on imports of petroleum and natural gas.

“Also, bilateral infrastructure cooperation is significant because the model, once successful, can be extended to Belt and Road countries,” said Wang, who is an advisor to the State Council, China’s cabinet.

In a report released last week, the think tank proposed more purchases of petroleum, natural gas, farm produce and commercial aircrafts to help address American concerns and the establishment of a China-US infrastructure investment fund to maintain the momentum of their bilateral economic relations.