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China's trade surplus with US hits record

Result, while good news for Chinese economy, is likely to trigger further discontent from Trump administration

Beijing

CHINA'S exports unexpectedly accelerated in June and its trade surplus with the United States hit a record high in a positive sign for the economy, though the overall result looks set to keep a bitter trade dispute with Washington on the boil for a while longer.

Growth in imports for June showed a moderate slowdown from May, official data showed on Friday.

The data came after the administration of US President Donald Trump raised the stakes in its trade dispute with China on Tuesday, saying it would slap 10 per cent tariffs on an extra US$200 billion worth of Chinese imports, including numerous consumer items.

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Firing the first shots in a trade war that has rattled financial markets and raised risks to the global economy, Washington last week imposed 25 per cent tariffs on US$34 billion of Chinese imports, drawing rapid retaliatory duties by Beijing on the same amount of US exports to China.

China's June exports rose 11.3 per cent from a year earlier, beating forecasts for a 10 per cent increase according to the latest Reuters poll of 39 analysts, but down from a 12.6 per cent gain in May.

After a strong start to the year, growth in China's exports has moderated recently, and is expected to face more pressure from the initial round of US tariffs. Both official and private business surveys reported softer export orders last month as the trade row deepens.

China's foreign trade faces risks of slowing in the second half of the year, General Administration of Customs spokesman Huang Songping told a news conference, though he said Beijing was capable of handling challenges.

Analysts expect shipments growth to slow in the second half of the year, putting more strain on an economy already feeling the pinch from a multi-year debt battle that has driven up corporate borrowing costs. Investors fear a prolonged trade battle with the United States could harm business confidence and investment, disrupting global supply chains and harming growth in China and the rest of the world.

China's commerce ministry confirmed last month that Chinese exporters were front-loading shipments to the US to get ahead of expected tariffs - a situation that could exacerbate any slowdown in shipments toward the year-end.

Imports grew 14.1 per cent in June, customs said, missing analysts' forecast of a 20.8 per cent growth, and compared with a 26 per cent rise in May.

The commerce ministry also said this week it will use funds collected from tariffs charged on imports from the US to help ease the impact of US trade actions on Chinese companies and their employees.

The ministry encouraged companies to increase imports of soybean, soymeal, vehicles, aquatic products from other markets.

In a sign Beijing is seeking alternative supplies of the commodities as it hit US imports with extra tariffs, China dropped import tariffs on a range of animal feed ingredients from several Asian countries.

China's exports to the US rose 13.6 per cent in the first half of 2018 from a year earlier, while its imports from the US rose 11.8 per cent in the same period.

The trade balance between the two countries, which is at the centre of the trade dispute, continued to move in favour of China.

In June the surplus with the US was at US$28.97 billion, up from US$24.58 billion in May, according to Reuters calculations based on customs data released on Friday.

The surplus was the highest with the US for any single month, according to Reuters calculations based on official data going back to 2008.

For January-June, it rose to US$133.76 billion, compared with about US$117.51 billion in the same period last year.

US President Donald Trump has railed against China's trade surplus with the US, which ran at US$375 billion in 2017, and has demanded Beijing cut it. Washington has warned it may ultimately impose tariffs on more than US$500 billion worth of Chinese goods - roughly the total amount of US imports from China last year.

China logged a trade surplus of US$41.61 billion for the month, compared with forecasts for a US$27.61 billion surplus in June and a surplus of US$24.92 billion in May. The surplus was China's highest since December. REUTERS