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China saw its exports grow at the quickest rate in over a year last month, with trade serving as a rare positive for the country’s economy amidst escalating tensions with Europe and the US.
June witnessed an 8.6% year-on-year increase in exports in dollar terms, as reported by the National Bureau of Statistics on Friday. This growth was an acceleration from May’s 7.6% and marked the strongest expansion since March 2023. The figure surpassed expectations, with analysts in a Reuters poll predicting an 8% growth.
On the other hand, imports in June declined by 2.3% year on year, significantly lower than economists’ forecast of 2.8% growth and May’s 1.8% expansion.
China’s trade surplus reached $99.05 billion, exceeding predictions of $85 billion and setting a new record for a single month, according to analysts at Goldman Sachs. In the first half of the year, exports increased by 3.6% and imports by 2% compared to the same period in 2023.
Amid weak domestic demand and a prolonged slowdown in the property sector, policymakers in Beijing have increasingly relied on exports and manufacturing to support China’s economy. The Communist party’s leadership is gearing up for a crucial economic policy meeting set to commence on Monday.
The US and Europe have reacted to a surge in low-cost Chinese exports by implementing stricter trade regulations.
In May, the US announced a significant increase in tariffs on $18 billion worth of Chinese imports, including imposing 100% levies on Chinese electric vehicles. In June, the EU revealed additional measures that would raise some tariffs on Chinese EVs to nearly 50%.
Analysts pointed out that the persistently strong exports coupled with relatively weaker imports indicate an imbalanced economic recovery. China’s consumer price growth slowed to 0.2% year on year in June, while factory prices continued to be in deflation for the 21st consecutive month.
Some experts believe that the surge in exports could be attributed to manufacturers accelerating shipments to evade the impending US tariff hikes scheduled for August.
Disruptions in shipping routes through the Red Sea caused by Yemen’s Houthi rebels have prompted Chinese exporters to expedite deliveries to ensure timely arrival for the peak Christmas season.
Goldman analysts mentioned in a note that “front-loaded exports amid rising trade policy uncertainty may have also supported exports on the margin, although it is difficult to quantify its contribution.”
Wei Li from BNP Paribas Asset Management described the imports data as a “mixed” picture and suggested that “policy adjustments will help maintain stable import levels.”
During previous years, China’s elite central committee has utilized the third plenary session to address critical economic issues. However, Premier Li Qiang has downplayed expectations for drastic interventions, stating at a World Economic Forum event last month that the country’s economy should be allowed to “gradually recover.”
Lynn Song, chief economist for greater China at ING, highlighted that the growth in exports was driven by car and semiconductor shipments, while imports were dragged down by agricultural products and goods linked to the property sector like timber and steel.
“Import growth has been quite imbalanced so far this year,” he remarked, adding that the US and EU tariffs could lead to a slowdown in auto exports towards the end of the year.
Capital Economics analysts forecasted that the impact of the tariffs, which cover only a small portion of Chinese goods, would be limited in the short term as exporters redirected shipments. They stated, “Overall, we expect exports to continue to boost economic growth in the near term.”