China exports rise despite simmering US trade row


Chinese exports rose unexpectedly in July, beating expectations for a fall, as trade tensions with the US continued to simmer.

Official figures showed exports rose 3.3% last month, compared to forecasts for a 2% drop.

Imports fell 5.6% in July, less than the expected 8.3% decline.

Still, analysts tip China’s economy will remain under pressure as Washington prepares to hit Beijing with a fresh round of tariffs next month.

“Looking ahead, exports still look set to remain subdued in the coming quarters,” Capital Economics’ Senior China Economist Julian Evans-Pritchard said.

The US has vowed to impose duties on $300bn (£246bn) worth of Chinese products on 1 September, after long-running trade negotiations between the two countries broke down.

Tensions between the world’s two largest economies intensified this week after the US officially named China a “currency manipulator” following a sharp drop in the value of the yuan against the US dollar.

The People’s Bank of China said on Monday that the slump in the Chinese currency was driven by “trade protectionism measures and the imposition of tariff increases on China”.

But central bank governor Yi Gang later said China would not engage in “competitive devaluations”.

A weaker yuan makes Chinese exports more competitive, or cheaper to buy with foreign currencies.

Workers prepare a container at a Chinese port in 2019
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Nonetheless, fears of a currency war rattled markets earlier this week.

On Thursday, the PBOC set its official yuan midpoint below the key 7 level to the US dollar for the first time since 2008.

But the trading point was firmer than traders had expected, and was seen as a signal that authorities wanted to stabilise the decline in the currency.

The yuan steadied and stock markets moved higher in Asian trading hours.

Pedestrians walk past shop fronts in Hong Kong's Tim Sha Tsui district in 2016
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Rising fears about the health of the global economy have prompted talk of recession, spreading anxiety about jobs and growth.

“Conditions probably won’t remain as healthy as they are now, as domestic demand is set to weaken after the tax hike,” Capital Economics Japan economist Marcel Thieliant says.


Over in Asia’s third-largest economy, growth has faltered amid sluggish demand at home and weak investment. India’s latest quarterly GDP growth dropped to a five-year low of 5.8%. The next GDP reading, due 30 August, could be weaker still.

The country has relied on domestic consumption to spur its huge economy, but spending has slowed sharply.

Car sales are one troubling example. In July, passenger vehicle sales plunged 31%, the steepest monthly fall in nearly two decades. The sector has slashed jobs and cut production as sales dry up.

So far this year, India’s central bank has cut rates four times. The benchmark rate currently sits at a near-decade low.

More stimulus measures to boost the economy, which is also battling the threat of a widening trade conflict with the US, are expected this year.

Chart showing India passenger car sales

Hong Kong

The Asian financial hub is fighting the pressures of a slowdown in China, the trade war and political unrest. Some economists expect that combination to push the territory into recession before long.

Gross domestic product shrank 0.4% in the three months to June compared with the previous quarter.

But those figures did not capture the impact of the pro-democracy protests that have gripped Hong Kong for more than two months, hitting tourism and retail sales.

Economists at DBS and Capital Economics are among those expecting that third-quarter numbers, due out in November, will show Hong Kong has fallen into a technical recession, defined as two consecutive quarters of negative growth.


The trade-dependent city state has been hit by weak global demand, slowing growth in China and the trade war.

Singapore is reliant on high-tech exports – and softer demand for electronics around the world has darkened its economic outlook.

The economy shrank by 3.3% in the second quarter, on a seasonally adjusted annualised basis. That prompted the government to cut its growth forecasts for 2019 to between 0% and 1%.

Chart showing Singapore exports in 2019

Oxford Economics expects that third-quarter GDP numbers, due in October, will show a contraction, meaning that Singapore will enter a technical recession.

Mr Kuijs says the impact of the trade war on Hong Kong and Singapore is “larger than in China itself, even though no one is imposing any tariffs on these countries”.

South Korea

Concerns swirled earlier this year that South Korea could slip into recession. But it managed to avoid that outcome after huge government spending helped the economy swing back to growth in the second quarter.

Gross domestic product grew 1.1% in the three months to June compared with the previous quarter, when South Korea posted its sharpest contraction since the global financial crisis. In July, the country’s central bank cut rates for the first time in three years.

Much of the pain has been caused by faltering tech exports, driven by the global electronics slowdown. That trade is crucial to South Korea, since electronics account for around 30% of the country’s exports. A simmering trade battle with Japan is adding more uncertainty to South Korea’s growth prospects.

Chart showing South Korean exports

US jobs growth weaker than expected

US construction workers
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The US economy added 130,000 jobs last month, slowing more than expected, the latest official figures have shown.

Economists polled by Reuters had expected an increase of 158,000. In July, the economy had created 159,000 new jobs.

The unemployment rate was unchanged at 3.7%, while average hourly earnings growth rose 3.2% from last year.

The US economy is feeling the strain of President Donald Trump’s tariff war with China and a wider global slowdown.

Mr Trump has been talking up the US economy in recent weeks amid growing unease about a potential recession.

Last month’s job figures were boosted by government hiring of 25,000 workers for the upcoming US Census. Hiring in health care and professional and business services was also up.

However, the Labor Department said employers added 20,000 fewer jobs in July and June than it previously estimated. And while pay and participation in the workforce increased, both remain lower than rates typical before the financial crisis of 2008.

The US Federal Reserve is widely expected to cut interest rates at its meeting this month in an attempt to keep the economy growing.

In July, the central bank cut rates for the first time since 2008.

However, that was not enough to satisfy Mr Trump, who has repeatedly called for a “substantial” rate cut.

In his latest tweets on the economy, Mr Trump denied that there were troubles brewing.

“The Economy is great. The only thing adding to ‘uncertainty’ is the fake news,” he wrote.

He also called into question the competence of Fed chair Jerome Powell, saying: “Where did I find this guy Jerome?”

Donald Trump tweet
Image copyrightTWITTER

Paul Ashworth, chief US economist at Capital Economics said the Labor Department’s report offered enough good news to make a dramatic cut by the Fed unlikely, pointing to the growth in wages and labour force participation.

For now, hiring remains strong enough to keep pace with growth in the labour force, economist Gus Faucher of PNC Bank said. But he predicted that jobs growth would slow further, given a slump in global growth and uncertainty over trade,

“Although job growth will slow, the US economy should avoid recession,” he said.