China makes up some ground on its U.S. trade deal commitments

On Tuesday, data from China’s General Administration of Customs showed a surge in imports and exports in September, with 13.2% and 9.9% growth year on year, respectively. The strong uptick shows how Beijing is navigating the politics of a post-pandemic recovery—exporting vital goods to worse-hit nations while aiming to meet its trade deal commitments to the U.S.

“China’s surprising resilience in exports has been mainly driven by its status as the first economy in and the first out of the COVID-19 pandemic,” analysts at Nomura said in a note, adding that demand for medical equipment and personal electronics continues to bolster China’s export growth.

Exports of high–value-added electronics have proved particularly good ballast for China’s economy this year, as much of the world’s middle-class workforce pivots to working from home. Shipments of personal computers provided a much-need boost to China’s second-quarter GDP data, returning the economy to growth after a decline in the first three months of the year.

While export growth in September remained relatively stable—up 1.9% over the month before—China’s imports are surging, leaping 15% over August. According to Bo Zhuang, chief China economist at TS Lombard, imports of pork and soy from the U.S. are driving the growth as China tries to uphold its commitment in phase 1 of the trade deal.

“China doesn’t want further escalation or deterioration with the U.S., so they’re trying to be nice for a few months,” Zhuang says, suggesting Beijing is biding time until the elections in November.

The U.S. and China struck a truce in their trade war in January. Washington agreed to stop piling tariffs on Chinese exports, and Beijing agreed to boost purchases of U.S. goods. The value of China’s imports from the U.S. skyrocketed 24.7% to $13.2 billion in September, the highest total since August 2018.

Nevertheless, China’s total imports from the U.S. are up only 0.2% in the first nine months of the year compared with the same period in 2019, according to customs data. That puts China far behind its commitment of boosting imports by 60% over 2017 levels.

And, even with China trying to “be nice,” trade relations with the U.S. have continued to deteriorate this year. In September—the month when a U.S. blockade on chipset sales to Huawei Technologies came into effect—semiconductor imports increased 18% over August and 28% over September 2019.

According to Zhuang, China’s tech giants are racing to stockpile semiconductors in case the U.S. throttles supply chains further. In the year to date, semiconductor imports are up 13.8%—the sixth largest driver of China’s import growth.