Notwithstanding a searing trade war with the U.S., China’s exporters experienced a strong October.
Chinese exports surged +16% in October compared to the year-ago period. That was faster than the preceding month’s year-over-year growth rate, even as October was the first full month when the U.S. implemented new tariffs on $200 billion of Chinese goods. The tariff rate, which is now 10% on these goods, will be hiked to 25% by the end of the year – something that could have potentially accelerated demand for Chinese exports in October, before prices increase further.
Another possible factor behind the export boost could be a weakening Chinese yuan, which lost almost -10% in value against the U.S. dollar since February. A lower yuan could be a tailwind to Chinese goods’ competitiveness in global trade, thereby potentially mitigating the headwinds posed by tariffs. But given that Chinese authorities/regulators are apparently taking steps to stabilize the yuan and arrest excessive short-selling in the currency, coupled with the slated hike in U.S. tariff rates on Chinese goods, it remains to be seen how long China’s export growth can continue. A lot could also hinge on the outcome of the scheduled trade talk between U.S. President Donald Trump and China’s leader Xi Jinping later this month when they would be attending the G20 summit in Buenos Aires.