China’s exports grew at their fastest pace in nearly 1-1/2 years in August. This suggests that manufacturers are rushing out orders ahead of tariffs expected from a growing number of trade partners. However, imports missed forecasts amid weak domestic demand.
The mixed trade data highlights the challenge facing Beijing as policymakers try to bolster overall growth. Policymakers don’t want to be too reliant on exports especially given the tightening of consumers’ purse strings.
China’s economy has failed to fire over the past year, amid a prolonged property sector downturn. A survey last week showed exports in the doldrums and factory gate prices at their worst in 14 months. This pointed to producers slashing prices to find buyers.
Incoming Shipment Slump
Outbound shipments from the world’s second-largest economy grew 8.7% year-on-year in value last month. This is the quickest since March 2023, customs data showed on Tuesday. It beats a forecast 6.5% increase in a Reuters poll of economists and a 7% rise in July.
But imports increased by just 0.5%, missing expectations for a 2% boost. This is down from the 7.2% growth a month prior.
“The strong export performance and trade surplus is favourable to economic growth in the third quarter and whole year,” said Zhou Maohua. Maohua is a macroeconomic researcher at China Everbright Bank.
“However, the global economic and geopolitical environment is complicated and China’s exports face a lot of headwinds,” he added.
Economists have warned that Beijing risks undershooting its growth target if it becomes too reliant on exports.
Trade Barriers
Moreover, mounting trade barriers are emerging as another significant obstacle, threatening China’s price-driven export momentum.
China’s trade surplus with the United States widened to $33.81 billion in August from $30.84 billion in July. Washington has repeatedly highlighted the surplus as evidence of the one-sided trade favouring the Chinese economy.
Brussels’ trade policy has turned more protective too. Beijing’s efforts to negotiate with the EU to ease tariffs on Chinese EVs have made little headway.
Even Canada last month announced a 100% tariff on Chinese EVs, along with a 25% tariff on Chinese steel and aluminium.
As China attempts to pivot and direct more exports to Southeast Asia and South Asia, it is also facing push back there.
India is also planning to raise tariffs on Chinese steel. Indonesia is eyeing heavy duties on textile imports. Even Malaysia opened anti-dumping investigations into plastic imports from China and Indonesia.
Still, some analysts expect outbound shipments to ride out the storm, given the relative inexpensiveness of China’s yuan and the relative ease with which exporters can re-route their wares to avoid the tariffs.
“Outbound shipments are likely to remain strong in the coming months. Admittedly, more barriers are being erected,” said Zichun Huang, China Economist at Capital Economics.
Slow Imports
The lower-than-expected imports might not bode well for exports in the coming months. Just under a third of China’s purchases are parts for re-export, particularly in the electronics sector.
China’s commodities purchases also pointed to a bleak domestic picture. Iron ore imports are down 4.73% from a year ago as weak demand in the country’s construction sector pinched steelmakers.
Furthermore, China bought a record 12.14 million metric tons of soybeans in August. Analysts say the buying spree was motivated by traders taking advantage of lower prices to stock up. There are concerns that trade tensions with the U.S. could intensify if Donald Trump returns to the White House next year.
