China's August exports unexpectedly shrink, imports remain weak

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China's exports unexpectedly fell in August while imports shrank for a fourth month, pointing to further weakness in the world's second-largest economy and underlining a pressing need for more stimulus as the Sino-US trade war escalates.

Beijing is widely expected to announce more support measures in coming weeks to avert the risk of a sharper economic slowdown as the US ratchets up trade pressure, including the first cuts in some key lending rates in four years.

On Friday, the central bank cut banks' reserve requirements for the seventh time since early 2018 to free up more funds for lending, days after a cabinet meeting signaled that more policy loosening may be imminent.

August exports fell one percent from a year earlier, the biggest fall since June, when it fell 1.3 percent, customs data showed on Sunday. Analysts had expected a two percent rise in a Reuters poll after July's 3.3 percent gain.

That's despite analyst expectations that looming tariffs may have prompted some Chinese exporters to bring forward or “front-load” US-bound shipments into August, a trend seen earlier in the trade dispute.

Many analysts expect export growth to slow further in coming months, as evidenced by worsening export orders in both official and private factory surveys. More US tariff measures will take effect on October 1 and December 15.

Sunday's data also showed China's imports shrank for the fourth consecutive month since April. Imports dropped 5.6 percent on-year in August, slightly less than an expected six percent fall and unchanged from July's 5.6 percent decline.

Sluggish domestic demand was likely the main factor in the decline, along with softening global commodity prices. China's domestic consumption and investment have remained weak despite more than a year of growth boosting measures.

China reported a trade surplus of $34.84 billion last month, compared with a $45.06 billion surplus in July. Analysts had forecast a surplus of $43 billion for August.

Trade pressure

August saw dramatic escalations in the bitter year-long trade row, with Washington announcing 15 percent tariffs on a wide range of Chinese goods from September 1. Beijing hit back with retaliatory levies, and let its yuan currency fall sharply to offset some of the tariff pressure.

China and the US on Thursday agreed to hold high-level talks in early October in Washington, the first in-person discussions since a failed US-China trade meeting at the end of July.

But there was no indication that any planned tariffs on Chinese goods would be halted, and markets expect a lasting peace between the two countries seems more elusive than ever.

White House economic adviser Larry Kudlow said on Friday the US wants “near term” results from US-China trade talks in September and October but cautioned that the trade conflict could take years to resolve.

China's trade surplus with the US stood at $26.95 billion in August, narrowing from July's $27.97 billion.

It still reached $195.45 billion in the first eight months of 2019, highlighting continued imbalances which have been a core complaint of Trump's in his administration's negotiations with Beijing.