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China trade contracts in August but worst yet to come, say economists


SHIPMENTS of Chinese goods are expected to weaken further as the US threatens to implement new tariffs and global demand remains soft.

China's exports during August fell by one per cent in dollar terms compared to the same month a year earlier, while imports decreased by 5.6 per cent, leaving a trade surplus of US$34.8 billion.

Economists had predicted that exports would rise by 2.2 per cent, while imports would contract by 6.4 per cent. Shipments to the US dropped 16 per cent from a year earlier, reported Bloomberg.

"We're looking more like we're heading towards the bear-case scenario," where six per cent growth in China this year slows to 5.4 per cent in 2020 under a 25 per cent US tariff on all Chinese imports, according to China International Capital Corp (CICC) senior economist Eva Yi. "More and more people are seeing this trade tension become a longer-term overhang rather than a short-term shock."

All this plays into US President Donald Trump's hand. As China's economy hits headwinds, America keeps creating jobs at a solid, albeit weaker, pace.

"Both the strength and breadth of hiring suggest that economic conditions are weakening in the second half, but not to the point of rising recession risk" for the US, according to Carl Riccadonna and Yelena Shulyatyeva of Bloomberg Economics.

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