China's central bank chief said Friday the country has plenty of policy tools left to handle the trade war with the United States.

There is "tremendous" room to counter the deepening trade war, People's Bank of China governor Yi Gang said in an interview with Bloomberg TV.

"We have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous," Yi said on Bloomberg TV.

Ties between China and the US have deteriorated sharply after trade negotiations stalled last month without a deal to lift bruising tariffs on goods worth $360 billion in two-way trade.

China said Thursday that it would soon release detailed information about a planned blacklist of "unreliable" foreign companies and individuals, that analysts expect will target firms cutting off supplies to Chinese tech giant Huawei.

Last month the US Commerce Department placed Huawei and dozens of its affiliates on an "entity list" on grounds of national security, curbing its access to crucial US-made components and software -- though a 90-day reprieve was later issued.

Yi has participated in several rounds of the trade negotiations with Washington and is scheduled to meet with US Treasury Secretary Steven Mnuchin this weekend during the G20 gathering of financial policymakers in Japan.

He said the meeting with Mnuchin would be "productive talk, as always," but trade war discussions would be "uncertain and difficult", according to Bloomberg News.

China's yuan, or renminbi, currency has also rapidly depreciated against the dollar as trade tensions have ramped up in recent weeks, nearing the critical seven to the dollar exchange rate.

The central bank has long prevented the yuan from falling below seven, but Yi hinted the bank may no longer defend the currency at that level.

"I don't think along this mathematical scale any number is more important (than) the other number," he said.

"The trade war would have a temporary depreciation pressure on renminbi, but you see, after the noise, (the) renminbi will continue to be very stable and relatively strong compared to emerging market currencies, even compared to convertible currencies," he told Bloomberg TV.

"I'm very confident (the) renminbi will continue to be stable at a more or less equilibrium level," Yi said.

US trade deficit shrinks in April but goods gap with China widens
Washington (AFP) June 6, 2019 - The mammoth US trade deficit shrank in April in a bit of good news for President Donald Trump, but the deficit in goods trade with China expanded despite steep tariffs imposed by Washington, the Commerce Department reported Thursday.

The falling deficit should cheer Trump, who has made cutting America's trade imbalance a priority, but economists warn that rising barriers to international commerce -- like tariffs -- threaten to derail the global economy.

The overall US trade deficit fell 2.1 percent in April to $50.8 billion, seasonally adjusted -- largely in line with analysts' expectations -- but the figure was only a decrease after a sharp upward revision to the March data.

So far this year, the US trade gap is still two percent higher than the same period in 2018.

Exports took their biggest dive in more than four years, declining by $4.6 billion to $206.8 billion, the largest drop since January 2015.

But imports fell faster, dropping $5.7 billion, the largest dip in three months.

In the first quarter, falling imports helped lift US GDP but economists caution that it points to a slowdown in underlying economic activity.

"It's nice that the trade deficit narrowed but it did so for all the wrong reasons," economist Joel Naroff wrote in a note to clients.

- 'Incomplete and naive' -

Likewise, RDQ Economics said that viewing imports simply as competition for domestically produced goods was "incomplete and naive."

"Over one-fifth of imports are raw materials that go into US production and a further 27% are imports of capital goods that go into the capital stock of US businesses," it said in an analytical note.

Still, April's shrinking gap between exports and imports could support growth in the second quarter.

The trade deficit with China jumped 7.6 percent for the month but was still down 10.8 percent for the year amid the escalation of a year-long trade war.

Meanwhile, the deficit with Mexico fell 0.6 percent to $7.9 billion for the month, helping reverse part of this year's sharp increase.

Trump has threatened steep tariffs on all Mexican goods as he demands that Mexican authorities help stem the flow of migrants into the United States from Central America.

The US exports slump was broad-based: autos and parts, medicines, and a $2.3 billion drop in civilian aircraft, likely reflecting the suspension of deliveries for a top-selling Boeing jet grounded after two deadly crashes.

Exports of capital goods were at their lowest since October 2017, while travel services as well as maintenance and repair also dipped.

Meanwhile, American demand for capital goods like civilian aircraft engines and microchips fell to their lowest level in 16 months.

The United States also imported fewer autos and auto parts, organic chemicals and gemstones, and bought less natural gas and wood pulp.

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China factory activity contracts in May
Beijing (AFP) May 31, 2019
China's manufacturing activity contracted more than expected in May, official data showed Friday, amid a bruising trade war with the United States and slowing domestic demand. The Purchasing Managers' Index (PMI), a gauge of factory conditions, came in at 49.4 for the month, down from 50.1 in April, according to the National Bureau of Statistics (NBS). Marking a three-month low, the figure fell below the 50.0 mark separating expansion from contraction. Economists surveyed by Bloomberg had predic ... read more