China on Track for $1 Trillion Trade Surplus This Year

China will publish its September trade data on Monday in the middle of the Asian session. With the focus shifting from the trade war to political wrangling in Washington, the data might pass under the radar. But it’s still likely to be important for countries that export significantly to China, such as Australia, New Zealand, and Japan.

Despite the high tariffs imposed by the US and pressure from other major economies, China’s trade has remained resilient through the summer. This has actually come as a bit of a surprise to many economists. On the one hand, it’s positive for currencies that depend on exports to China. On the other hand, it might mean that Chinese authorities are less likely to stimulate the economy to offset the effects of the trade war.

What the Market is Expecting

The consensus among analysts is that China’s trade surplus for September will diminish slightly to $96.0 billion from $102.3 billion in August. However, this is expected to be because imports will accelerate faster than exports. While exports are important for gauging the health of the global economy, including consumer demand, imports are an important factor to support commodity currencies.

Goods shipped to China during September are expected to have increased 3.5%, faster than the 1.3% increase in August. Meanwhile, China’s exports are anticipated to have grown 5.2% compared to 4.4% a month earlier. It should be noted, however, that trade activity normally increases in September as businesses lock in orders ahead of the extended Golden Week holiday.

Trade War Intensifies

Despite the positive numbers for last month, the trade relationship between China and the US appears to be souring once again. US President Donald Trump and his Chinese counterpart, Xi Jinping, are expected to meet later this month and potentially discuss trade relations. The latest moves by import and export authorities in both countries might be related to attempts to increase leverage in the ongoing negotiations ahead of the Presidential meeting.

On Thursday, China announced broad new export controls on rare-earth magnets, a key point of contention between the Asian giant and the US. In fact, exporting these elements was a key part of the Madrid framework deal between the US and China that extended a moratorium on high tariffs between the countries.

Searching for a Breakthrough

The measure on rare earths was one of several instances of increased tensions. The US imposed special fees on Chinese ships, citing trade violations. China reciprocated with special fees on US ships. It was also reported that China had imposed stricter controls on semiconductor imports, requiring individual inspection of all chips.

Meanwhile, US Trade Representative Jamison Greer said that both sides were in close communication to avoid “surprises”. Reportedly, trade negotiations are ongoing, with the US side expressing optimism that a deal can be reached before the Trump-Xi meeting. Meanwhile, China has not confirmed whether Xi will actually meet Trump, or even if he will participate in the APEC summit, where the meeting is expected.