Trump tariff threat overshadows strong China factory

BEIJING: China’s industrial output grew much faster than expected at the start of the year, suggesting the economy may be picking up momentum even as US President Donald Trump readies hefty tariffs against one of its most strategic growth drivers — technology.
Tariffs on tech exports could potentially hit the fastest growing segment of China’s industrial sector, an area that the country’s leaders have been keen to promote as they push for “higher quality” economic growth.
Trump is seeking to impose tariffs on up to $60 billion of Chinese imports in the very near future and will target the technology and telecommunications sectors.
The latest US trade threat, which follows the imposition of tariffs on steel and aluminium last week, overshadowed unexpectedly robust Chinese industrial and investment data for the first two months of the year.
“There is a good possibility that Trump will do a lot more against China…The trade situation is obviously a rising risk and a relatively new challenge for China,” said economist Kevin Lai at Daiwa Capital Markets in Hong Kong.
Industrial output in January-February rose 7.2 per cent from the same period a year earlier, the National Bureau of Statistics said on Wednesday, surpassing analysts’ estimates for a rise of 6.1 per cent and picking up sharply from 6.2 per cent in December.
Analysts had expected a slight stumble due to a crackdown on heavily polluting industries, but the data showed China’s steel output rose to its highest in months as mills prepared for a seasonal pick-up in construction in spring.
Coal and power output were also up sharply, possibly reflecting a spell of bitterly cold weather.
Reflecting China’s growing focus on the production of higher-value goods, the output of computers, telecommunications equipment and other electronics rose 12.1 per cent on year, extending a long period of double-digit growth.
Output of industrial robots rose around 25 per cent.
However, data from China early in the year is typically treated with caution due to distortions caused by the timing of the week-long Lunar New Year celebrations, which fell in late January 2017 but started in mid-February this year.
As such, a clearer picture of China’s economic health may not emerge until first-quarter data is released in April.
Many economists expect China’s growth to moderate this year, weighed down by a cooling property market and the government’s clampdown on riskier lending practices, which is pushing up corporate borrowing costs.
But most readings available so far, ranging from output to property investment to business surveys, suggest China’s growth has picked up so far this year, keeping a synchronised global recovery on track.
Upbeat trade data last week had tipped a stronger industrial showing, with exports unexpectedly surging at the fastest pace in three years in February even as trade relations with the United States rapidly deteriorate.
China runs a $375 billion trade surplus with the United States and when President Xi Jinping’s top economic adviser visited Washington recently, the administration pressed him to come up with a way of reducing that number.
“While risks of escalation in US-China trade tensions exist, we expect China to remain relatively restrained in its response and, as a result, overall economic damage to stay contained,” Louis Kuijs, head of Asia economics at Oxford Economics said in a note.
China’s electronics and tech exports account for 43 per cent of its total exports to the US. — Reuters