US-China Trade Growing Robustly
In July, the United States goods trade deficit with China rose 10.6 percent year-on-year to reach $33.6 billion, a three-percent increase over June, according to a report just released by the US-China Economic and Security Review Commission.
US exports to China increased 9.7 percent year-on-year to reach a seven-year monthly high of $10 billion. Civilian aircraft, engines, and parts, and sorghum, barley, and oats largely contributed to this increase.
US imports from China also rose, at a 10.4-percent year-on-year clip to $43.6 billion, with toys, games, sporting goods, and apparel as leading import categories.
US oil exports to China have increased dramatically in 2017, according to the same report. US oil exports to China in the first half of 2017 amounted to 74 million barrels, an 88.3-percent increase from the same period in 2016. China accounted for 10 percent of total US oil exports in February 2017, before falling to a 3.8 percent share in June.
China, which is the world’s largest importer and consumer of crude oil, surpassed Canada as the biggest buyer of US oil in February 2017. The US was China’s 11th-largest source of crude imports through the first seven months of 2017, according to data from China’s General Administration of Customs. (Russia, Angola, and Saudi Arabia are China’s three largest sources of oil imports).
“Decreased oil field production in China has forced Beijing to increase its global crude oil imports,” said the report. From January to March 2017, Chinese oil production fell eight percent as lower prices forced many of China’s high-cost oil fields to shut down. By 2020 China’s oil production is estimated to decline by seven percent from 2016 levels.
China is increasing oil imports also to expand its strategic petroleum reserve. Beijing began stockpiling oil a decade ago to ensure a steady supply of crude.
The US has particularly benefited from China’s increasing oil imports. In 2015, the US ended a 40-year ban on crude oil exports. Despite price increases this year, US crude has remained cheaper than its Dubai and Brent counterparts.
The US has also been able to increase its share of the global oil market as the Organization of the Petroleum Exporting Countries (OPEC) and other oil exporters attempt to cut production to support global prices. The US increased production by around 750,000 barrels of oil per day between November 2016 and May 2017.
“For US oil exports to China to continue to increase, however, prices will need to remain cheap enough to offset the higher transportation time and cost of US exports,” the report noted.
Wang Yilin, the chairman of China’s largest oil and gas producer China National Petroleum Corp., was cited in the report as indicating China will continue looking to the US for oil. “The US has very rich oil and gas resources,” he was reported as saying, “and as China pursues a diversification of its crude supplies the US will of course be one of the sources.”
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