China: Trade conflict important driver of trade growth – ABN AMRO

Arjen van Dijkhuizen, senior economist at ABN AMRO, suggests that the weakening of Chinese exports and imports since end-2018 is to a large extent driven by the escalation of US-China tensions and related payback from frontloading of trade flows.

Key Quotes

“Looking through the usual volatility at the start of the year (due to annual changes in timing of the Chinese New Year), total Chinese exports in dollars grew by only 0.4% yoy in January-May 2019, compared to almost 13% in the same period of 2018. That fits with the overall weakening of global growth and trade, with the effects of the trade conflict likely starting to hit China-centered global supply chains.”

“Meanwhile, imports in dollars contracted by 3.7% yoy in January-May 2019, compared with a growth of over 21% in the same period of 2018. While it is tempting to attribute the slowdown of imports to a weakening of domestic demand, the trade conflict and its impact on exports is probably even more important as a large part of imports is closely related to exports.”

“Price effects also play a role, given that China imports a lot of commodities and commodity prices have been hit by trade tensions and global growth fears as well.  Looking forward, a further escalation of US-China trade/tech tensions poses even more downside risks to China’s export and import growth.”