China’s trade surplus with the US continues to reach record highs, at USD 34 billion in September from August’s USD 31 billion. It’s probably unsustainable, as the Trump Administration’s tariffs on USD 200 billion of Chinese goods went live on 24 September. The planned Trump-Xi meeting on 30 November/1 December 2018 will be tense, if it even takes place. Globally, Chinese exports rose 14.5% (prior: 9.10%), largely above expectations of 9.80% while imports at 14.30% remain lower for the second consecutive month (prior: 19.90%), thanks to competitive advantage of a weaker renminbi.
10% tariffs could be increased to 25% by year-end, if no progress in US-China trade is made. This could hammer China and its manufacturing sector. US consumers are robust spenders, but the 10-25 hike would weigh heavily on Chinese exporters. China’s economy appears resilient, although worries related to growth remain. The central bank’s challenge is to balance liquidity and credit to support the economy and safeguard against a credit collapse, which would bring on a recession.
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