China hopes to reach trade agreement with USA as soon as possible

Daniel Fowler
December 9, 2019

Containers are seen at the Yangshan Deep Water Port in Shanghai, China August 6, 2019. "Right now, the clouds of recession still remain well offshore despite troubled economies elsewhere in the world and a trade war".

Monday's sudden chill came after customs data released on Sunday showed exports from China in November fell 1.1 percent from a year earlier, confounding expectations for a 1 percent rise in a Reuters poll.

The modest Asian gains compared with Wall Street, which rose to near record highs on Friday on a strong jobs report and some sign of optimism about US-China trade talks, with the benchmark S&P 500 closing within 0.2 per cent of its peak set in late November. The loonie shed more than 0.5% on Friday following data showing the Canadian job market losing a surprise 71,200 net positions in November when economists had expected a gain of 10,000.

China and the United States are negotiating a so-called "phase one" deal aimed at de-escalating their prolonged trade dispute, but it is unclear whether such an agreement can be reached in the near term.

A US House bill targeting China's camps for ethnic Muslim minorities in Xinjiang has also angered Beijing, further clouding prospects of any deal.

Top White House economic adviser Larry Kudlow confirmed on Friday that the December 15 deadline to impose the new tariffs remains in place, but added that President Donald Trump likes where trade talks with China are going.

"Markets are telling us that there are hopes for something positive to come up before the deadline", said Peter Cardillo, chief market economist at Spartan Capital Securities in NY. His economic adviser, Larry Kudlow, said Friday that there were "no arbitrary deadlines" to complete a limited trade deal.

Still, investors think that could change if trade tensions escalate further, especially if Trump goes ahead with planned tariffs on some $156 billion worth products from China from Dec 15.

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According to a Reuters poll, analysts had forecast a 1.0% increase in exports, a 1.8% decline in imports and a surplus of $46.30 billion.

China confirmed on Friday that it will waive import tariffs for some soybeans and pork shipments from the United States. This marks the first year-on-year growth since April.

But falling industrial profits and factory prices suggest persisting downward pressure on the sector.

Energy services firm Baker Hughes said in its closely watched weekly drilling report on Friday that the U.S. drill count fell in the week to December 6 - a seventh week of decline.

Despite the growing strains on the economy, Beijing remains reluctant to implement major stimulus for fear of heightening financial risks given already high levels of debt.

Revenue from import taxes jumped to $7.2 billion that month, the most in history and a $1 billion rise from the same time a year earlier.

People's Bank of China Governor Yi Gang reiterated in a signed article published last week that China will not resort to quantitative easing and is committed to maintaining a prudent monetary policy.

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