China’s trade surplus with the US rose to a new high of US$35.5 billion last month as businesses raced to prepare for a threatened increase in tariffs over the new year.

China’s exports to the US rose by 9.7 per cent year on year to US$46.2 billion in November, while imports dropped 25 per cent to US$10.6 billion, according to data published by the General Administration of Customs in China on Saturday.

But China’s overall trade last month was worse than expected, with export growth slowing to 5.4 per cent and import growth slowing to 3 per cent.

This marked a big fallback from the double-digit expansions recorded in recent months as China’s economy continued to slow down with many small private exporters cutting back their operations and laying off staff.

However, due to the Chinese currency’s depreciation against the dollar, in yuan terms exports rose by 10.2 per cent and imports by 7.8 per cent.

Exports to the US are likely to have been bolstered by American businesses front-loading their stock by buying more goods from China before the threatened increase in tariffs kicked in.

However, the pace of export growth to the US slowed from 13 per cent in October, which suggested that the impact of front-loading was fading as many American buyers had stockpiled goods well in advance.

The US had been threatening to raise tariffs on US$200 billion of Chinese goods from 10 per cent to 25 per cent on January 1 – but this has since been deferred following last weekend’s meeting between Donald Trump and Xi Jinping in Argentina.

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The two agreed a 90-day window starting from December 1 to try to resolve their differences, but if they cannot do so then the threatened tariff increase will kick in on March 1.

“The temporary trade truce between US and China as well as China’s latest promise to buy more US goods could reduce the trade surplus in future,” Jiang Chao, chief China economist from Haitong Securities, said.

Over the first 11 months of the year, China’s total trade with the US rose by 7.2 per cent to 3.8 trillion yuan (US$557 billion), accounting for 13.7 per cent of the value of China’s overall trade.

However, China’s exports to Europe rose only 6 per cent year on year, sliding from 14 per cent in October, while South Korean imports of Chinese goods fell by 3.6 per cent compared with the same period of last year.

Other economic indicators also suggest that China’s exports are facing stronger headwinds.

The new export order component in China’s official purchasing managers’ index had been contracting since June and barely picked up in November.

Another key export barometer is the biannual Canton Fair. The most recent event – which ran from mid-October to early November – saw transactions falling by 1 per cent, or US$300 million, compared with last autumn.

Xu Jianwei, senior China economist from French bank Natixis, said the bigger fall in imports from 21.4 per cent in October pointed to weakness in domestic demand but higher base number from November last year also needed to be taken into account.

In particular, imports of soybeans plunged by 38 per cent, while iron ore, coal and steel imports also fell.

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The next set of economic data, including retail sales figures, fixed asset investment and property investment, will be released next week.

“If there are more bad economic numbers, it could affect policy planning for next year at the coming Central Economic Work Conference,” Xu said.

The conference usually takes place in mid-December and is where senior policymakers agree directions for the following year’s policy, details of which are released in March during the annual National People’s Congress.

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