China, record surplus amid sluggish domestic demand... Trade conflict ahead of APEC is ‘homework’

(Shanghai = Yonhap News) Correspondent Cha Byeong-seop = Despite sluggish domestic demand, China continues to maintain a large trade surplus thanks to record-breaking export growth, but for this reason, it is assessed that it is facing trade conflicts as a task ahead of the Asia-Pacific Economic Cooperation (APEC) summit to be held in China.

According to an announcement by the General Administration of Customs, a customs authority, on the 10th, China's goods trade surplus (in dollars) from January to October recorded $1.4259 trillion (approximately 1,402 trillion won), exceeding $1 trillion in annual surplus for two consecutive years.

Meanwhile, according to country-by-country statistics compiled by Reuters, the US trade deficit with China last month was $32.7 billion (about 43 trillion won). U.S. exports to China were $13.7 billion (approximately KRW 18 trillion), a 35.0% increase from the same period last year, while imports from China were $46.4 billion (approximately KRW 62 trillion), a 32.9% increase compared to the same period last year.

ASEAN (Association of Southeast Asian Nations) trade deficit with China last month was $31.9 billion (about 42 trillion won).

As China is hoping to solidify its image as a 'multilateral trade protector' with the Asia-Pacific Economic Cooperation (APEC) summit held in Shenzhen, Guangdong Province on the 18th and 19th, the record-breaking trade surplus could be a burden.

Meanwhile, as U.S. President Donald Trump and Chinese President Xi Jinping are scheduled to hold their third face-to-face summit this year with the APEC summit, there is talk of the possibility that trade issues, including tariffs, will be discussed as a major agenda.

Although not a member of APEC, the European Union (EU) also has a serious trade imbalance with China.

Last month, EU exports to China amounted to only $21.2 billion (approximately KRW 28 trillion), a 4.2% decrease from the same period last year, while imports from China increased by 24.4%, reaching $54.6 billion (approximately KRW 73 trillion).

Accordingly, the EU's trade deficit with China in October was $33.4 billion (approximately KRW 44 trillion), a small decrease compared to $34.8 billion (approximately KRW 46 trillion) last September, which was the highest monthly record.

China and the EU have agreed to limit EU imports of Chinese-made hybrid cars from December, but there is talk of an increase in China's 'push exports' until November ahead of the implementation of the regulations.

In addition, it has been pointed out that automobiles account for only a small portion of the EU's trade deficit with China, and the EU is also discussing adopting measures similar to Section 301 of the US Trade Act against China.

It is notable that China's import growth rate (41.6%) in October exceeded the export growth rate (35.2%), but Gary Ng, chief economist at asset management firm Natixis, said, "Although imports are recovering, it is premature to see this as a sign of domestic demand recovery as the rise in raw material prices has clearly had an impact."

He then pointed out that in the wake of the AI ​​boom, imports of electronic components for export products have also increased.

Joe Pycell, economist at research firm Trivium China, said, “There is a high risk that trade barriers, including additional tariffs, will be added next year (against China).”

Reuters observed that the Chinese economy's dependence on exports is increasing amid sluggish domestic demand, which could make the Chinese economy more vulnerable to foreign protectionist measures and a global economic slowdown in the future.

“Considering the base effect, trade growth could moderate next year,” said Lin Song, chief economist at ING Bank.

Meanwhile, Korea, which exports a large portion of semiconductors, recorded a trade surplus of $13.6 billion (about 18 trillion won) with China in October. Korea's exports and imports from China increased by 110.2% and 92.4%, respectively, compared to the same period last year.