China’s trade surplus narrows in September

New export orders and micro data from Guangdong have given supply chain managers “fair warning,” IHS said.

By ·

It was only a matter of time before the turmoil in the U.S. and eurozone fed into China’s trade data, noted two IHS Global Insight China economists today.

Indeed, the PMI sub-index for new export orders and micro data from Guangdong have given supply chain managers “fair warning,” IHS said.

According to IHS Global Insight China Economists Alistair Thornton, and Xianfang Ren in Beijing, a deteriorating economic picture in developed markets is dragging on export growth, while domestic tightening – still in place for the time being – is weighing on imports.

This brings China’s surplus for the quarter to $64 billion, up from Q2’s $47 billion. IHS added that it is important to note that September is traditionally a poor month for trade, but whether this month – like September 2008 – marks the start of a sharp decline depends largely on developments in the eurozone.

Both economists said that the shrinking surplus, however, “will provide little respite against the more aggressive voices in Congress, who are once again posturing for domestic audiences with a trade bill targeted at China’s currency.”

They said that the renminbi will, as always, continue its gradual appreciation path. Only a repeat of 2008 would stop the renminbi in its tracks, while a depreciation against the dollar, as suggested by recent movements in the NDF market, remains extremely unlikely.

This will provide additional weight for a loosening of policy, said the economists. China’s economy will be getting less support from the external sector going forward, and with softer commodity prices helping to calm inflationary pressure, the start of an official loosening could be close.

In an interview with SCMR, Thornton said that the shrinking surplus is reflection of weakening growth in advanced economies, and as such MNC activity will suffer as a consequence.

“Moreover, the policy-driven slowdown in China is dragging on growth, which will also weigh on opportunities for MNCs,” he added. “To a large extent, the next year of China growth will be dictated by realities in the U.S. and Eurozone. Should those economies double-dip, China will follow.”

Finally, Thornton observed,  unlike 2008, China only has “limited ammunition” to fight off a dramatic slowdown.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

All Topics
Latest Whitepaper
Warehouse Management Systems (WMS) / Inventory Management Technology: 6 Trends for the Modern Age
Here’s how the next generation of warehouse and inventory management systems are evolving to help logistics operations operate more efficiently and improve their bottom lines in our brave, new digital age.
Download Today!
From the March 2018 Logistics Management Magazine Issue
We know e-commerce is reshaping logistics, but what are the technologies savvy managers can leverage to meet evolving requirements and shifting operational constraints? We’ve rounded up insights from leading analysts to share tools that are available now as well as what’s on the horizon.
Reverse Logistics in the “Age of Entitlement”
Logistics Management’s Viewpoint on E-commerce: Leveraging available tools
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Securing IoT data across the connected supply chain
Learn why a holistic approach to IAM is the most effective way to govern access to your systems and information requested by your partners, vendors, customers, and connected devices.
Register Today!
Evolution of E-commerce: The possibilities of tomorrow
We know e-commerce is reshaping logistics, but what are the technologies savvy managers can leverage...
State of Global Logistics: Delivering above and beyond
Industry experts agree that costs across all sectors worldwide will continue to rise in 2018, and...

2018 Rate Outlook: Economic Expansion, Pushing Rates Skyward
Trade and transport analysts see rates rising across all modes in accordance with continued...
Building the NextGen Supply Chain: Keeping pace with the digital economy
Peerless Media’s 2017 Virtual Summit shows how creating a data-rich ecosystem can eliminate...