China’s trade growth picked up in August, though imports fell short of expectations, underscoring persistent weakness in domestic demand within the world’s second-largest economy.
Exports grew 25% in U.S. dollar terms in August from a year earlier, according to official customs data released Tuesday, in line with Reuters-polled analysts’ forecasts and quickening from a 23.9% increase the previous month.
Imports rose 28.2% last month, missing economists’ estimates of 30% in a Reuters poll, though the figure gathered momentum from the 27.5% recorded in July.
China’s trade surplus swelled to $119.09 billion from $112.5 billion in July, reflecting the continued gap between the country’s robust export engine and its sluggish domestic consumption.
Exports have become the primary growth driver for China’s economy, with surging demand for high-tech components amid a global build-out of AI infrastructure helping cushion geopolitical shocks and slumping investment.
Policymakers set a target range of 4.5% to 5% for China’s GDP growth this year, but momentum has sputtered after a solid start, with growth slowing to a more than three-year low of 4.3% in the second quarter.
Data released last month showed domestic demand and investment weakened further in July, while manufacturing activity contracted for a second straight month, adding to concerns about the economy’s trajectory.
Neo Wang, China strategist at Evercore ISI, expects growth to regain some momentum in the second half of the year, encouraged by the “sense of urgency and determination in Beijing’s recent policy communications,” as well as stabilizing manufacturing activity in August.
Wang also noted that fiscal spending by the government has accelerated in recent weeks, helping arrest the decline in investment, while Chinese government plans include a $54 billion capital injection into several state-owned banks and insurers.
The offshore yuan barely moved after the data release on Tuesday, standing at 6.7099 per U.S. dollar, having strengthened 3.8% year to date against the greenback, outperforming its Asian peers.
China’s breakout export performance has drawn sharp scrutiny from Western trading partners, who are demanding Beijing rebalance trade and direct more support toward domestic demand.
Group of 20 finance ministers gathered in the U.S. earlier this month and issued a joint statement criticizing economies that rely heavily on exports, with China being the only dissenting member.
Beijing pushed back on the trade complaints, calling them “an excuse to pressure and restrict China,” signaling continued friction with major trading partners over its economic model.
People’s Bank of China Governor Pan Gongsheng said during a speech at the G20 summit that China has never actively pursued a trade surplus, nor has it depreciated the currency to gain trade competitiveness.
Wang said Washington’s frustration over trade relations is unlikely to derail the bilateral relationship ahead of a high-stakes visit by Chinese leader Xi Jinping to Washington D.C., scheduled later this month.
Shan Guo, a partner at China-focused Hutong Research, expects one or two interest-rate cuts by year-end, with the pace tied to the Federal Reserve’s policy moves, Ministry of Finance bond issuance, and the yuan’s pace of appreciation.
Guo added that “the more the yuan appreciates, the more room the PBOC has to cut interest rates, even if the Fed keeps hiking,” suggesting continued flexibility in Beijing’s monetary policy toolkit.
