China's exports up solidly but slowing imports dim trade outlook

China’s exports grew at their fastest pace in nearly 1-1/2 years in August, suggesting manufacturers are rushing out orders ahead of tariffs expected from a growing number of trade partners, while imports disappointed amid weak domestic demand.

The mixed trade data highlights the challenge facing Beijing as policymakers try to bolster overall growth without becoming 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, and a survey last week showed exports in the doldrums and factory gate prices at their worst in 14 months, pointing to producers slashing prices to find buyers.

Outbound shipments from the world’s second-largest economy grew 8.7 per cent year-on-year in value last month, the quickest since March 2023, customs data showed on Tuesday, beating a forecast 6.5 per cent increase in a Reuters poll of economists and a 7 per cent rise in July.

But imports increased by just 0.5 per cent, missing expectations for a 2 per cent boost and down from the 7.2 per cent growth a month prior.

“The strong export performance and trade surplus are favourable to economic growth in the third quarter and whole year,” said Zhou Maohua, 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.”

Economists have warned that Beijing risks undershooting its growth target if it becomes too reliant on exports, following a series of lacklustre data, raising pressure on policymakers for more stimulus to revive China’s economy.

“The continued strong run of exports may actually delay near-term policy support, and we continue to expect bolder measures to be released in Q4,” Nomura analysts said in a note.

Outbound shipments to the European Union grew 13.4 per cent in August year-on-year, which represented the biggest increase out of China’s major export markets, followed by an 8.8 per cent lift in sales to the Southeast Asian economies.

Chinese exports to the US rose by just an annual 4.9 per cent last month but imports grew 12.2 per cent over the same period, the most of any major import market.

Trade barriers

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, and Beijing’s efforts to negotiate with the EU to ease tariffs on Chinese electric vehicles (EVs) have made little headway.

Last month Canada announced a 100 per cent tariff on Chinese EVs, along with a 25 per cent tariff on Chinese steel and aluminium.

As China attempts to direct more exports towards Southeast Asia and South Asia, it is also facing pushback there.

“Aside from incoming tariffs and the sluggish export orders data of the last few months, if global growth momentum begins to slow too, this could also drag export momentum.”