China’s export growth accelerated in August, reinforcing the importance of overseas demand to an economy still struggling with weak domestic consumption, slowing investment and prolonged weakness in the property market.
Exports expanded 25% year-on-year in US dollar terms last month, matching forecasts and accelerating from the 23.9% growth recorded in July, according to customs data released on Tuesday.
Imports also surged, rising 28.2% year-on-year in August, compared with a 27.5% increase in July and a forecast for a 30% rise. The stronger-than-expected import growth provided another indication of activity in parts of the Chinese economy, even as domestic demand remains subdued.
The export performance has been supported by global demand for Chinese-made cars, semiconductors and other high-tech goods. But the strength of external trade stands in sharp contrast to weaknesses in domestic consumption, investment and the property market, highlighting Beijing’s reliance on overseas demand as it seeks to achieve its annual growth target of 4.5-5%.
China’s economy grew 4.3% in the April-to-June period. Data released last month showed that industrial output and retail sales both slowed at the beginning of the third quarter, while fixed-asset investment recorded a sharper decline during the first seven months of the year. The property market, once a major engine of economic expansion, remains in a years-long downturn.
The divergence between export strength and domestic weakness is also visible across industries. While the artificial intelligence boom has lifted profits among advanced manufacturers, businesses dependent on the domestic market have been grappling with producer price inflation and weak demand.
Premier Li Qiang, China’s No. 2 leader, called in August for efforts to stabilise external demand and expand international trade cooperation as economic growth sputtered. At the same time, he acknowledged insufficient domestic demand, difficulties facing industries and companies, and rising uncertainties in the international environment.
Beijing has increased fiscal support to the economy, including an 800 billion yuan ($119.21 billion) financing tool aimed at strengthening infrastructure investment. However, the continued strength of exports reduces the immediate pressure on the government to undertake large-scale measures to raise household incomes, improve job security and revive the property market in an effort to strengthen domestic consumption.
That reliance on exports carries its own risks. Using overseas markets to absorb China’s industrial capacity leaves the economy vulnerable to further restrictions from trading partners. Both the United States and the European Union have demanded that Beijing reduce its trade surpluses, potentially increasing pressure on China’s export-driven growth model.
China’s trade surplus reached $119.09 billion in August, up from $112.5 billion the previous month, providing further evidence of the scale of the country’s external trade strength.
Relations with Washington have so far avoided a renewed escalation despite continuing friction. A trade truce reached between Beijing and Washington late last year, when the two countries’ presidents met, has held. The two governments are now exploring reciprocal tariff cuts covering $30 billion worth of goods from each side as they prepare for another summit later this month.
For Beijing, the latest export figures offer a significant source of economic momentum. But they also expose the continuing imbalance between strong external demand and a domestic economy that has yet to regain comparable strength, leaving China’s growth increasingly tied to the willingness of overseas markets to absorb its expanding industrial output.
