Why did trade frictions increase China's foreign trade surplus by nearly 40%?

Against the background of the tense Sino-US trade relations, inertial thinking will continue to narrow China's trade surplus. However, according to customs statistics, China's cumulative trade surplus was 130.47 billion US dollars between January and May, an increase of 38% over the same period last year. Before that, from 2016 to 2018, China's foreign trade surplus has declined for three consecutive years. On June 23, Guan Tao, former director of the Balance of Payments Department of the State Administration of Foreign Exchange and senior researcher of the China Forty People's Forum on Finance, pointed out at the "Tsinghua University and the World Economic Forum" that the main reason for the expansion of China's trade surplus was not an increase in exports, but a decrease in imports. The decline in imports is due to insufficient domestic investment and demand. For example, in July last year, China lowered import tariffs on automobiles, but because of limited demand, the cheaper imports of automobiles will not increase. Guan Tao said that from the experience of the past two decades, the expansion of China's trade surplus this year is a big probability event. He said that the change of the difference between China's and the world's economic growth is negatively related to the change of China's foreign trade import and export balance. That is to say, it is normal that China's economic growth is faster than that of the world economy, but when the gap between China and the world economy is narrowed, China's foreign trade surplus will generally expand in 1998, 2008 and 2015. The principle of

is that China's exports are sensitive to external demand and imports are sensitive to domestic demand. When the expansion of external demand is faster than that of domestic demand, or when the contraction of external demand is slower than that of domestic demand, the export performance rate will be better than that of imports, which will lead to the expansion of the surplus of foreign trade imports and exports. However, Guan Tao said that because China's trade surplus is expanding not because of increased export competitiveness, but because of insufficient domestic investment and consumption requirements, China's economy as a whole is still facing downward pressure.

"At present, external demand is a small part of economic growth, so the upward supporting effect of external demand on economic growth may be less than the downward speed of domestic demand, and the whole economy may still be in a downward state." He said. For the future exchange rate of RMB to US dollar, Guan Tao said that any policy has its advantages and disadvantages. It is difficult to judge the advantages and disadvantages whether to abide by it or not. The key is to do scenario analysis and stress testing, and to anticipate what needs to be done in the worst case.

"Everyone believes you can hold on to 7, so you won't attack you, as you've seen in the past few years. Last year, the reason why the intermediate price of RMB did not break 7 was that China had credibility in keeping 7. (This year) the exchange price of RMB broke 6.9 in May, but the intermediate price did not break 6.9, because we have learned lessons from the previous two times, and we dare not act rashly. He said. Guan Tao said that the final exchange rate of RMB to US dollar would be below 7 or above, depending on the situation at the end of the year. If China and the United States can reach an agreement, there is no reason for the RMB to break 7. If it fails, or even trade frictions expand to other areas, there may be extreme pessimism in market confidence. At this time, the government will choose to stick to it, and what price it will pay for it, and what will happen if it fails to do so.