China’s trade growth accelerated in August, but imports fell short of expectations, reinforcing concerns that domestic demand in the world’s second-largest economy remains weak.
Exports grew 25% in U.S. dollar terms in August compared with a year earlier, according to official customs data released on 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 27.5% growth recorded in July.
As a result of the widening gap between exports and imports, China’s trade surplus swelled to $119.09 billion from $112.5 billion in July.
Chinese shipments to the United States surged 34.4% in August, extending double-digit gains seen for most of this year, while imports from the U.S. grew 17.8%, according to CNBC’s calculations of official data.
Exports to the European Union expanded 6.6% while imports ticked higher by just 0.7% last month, and China’s imports from South Korea more than doubled while exports jumped nearly 50%.
“China continues to rely on exporters to support the economy,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, noting mounting pushback from governments globally over its trade imbalances.
Exports have become the primary growth driver for China’s economy, as surging demand for high-tech components amid a global build-out of AI infrastructure has helped cushion geopolitical shocks, sluggish domestic demand, and a slump in investment.
The offshore yuan barely moved following the data release on Tuesday, standing at 6.7099 per U.S. dollar, having strengthened 3.8% year to date against the greenback.
Council on Foreign Relations senior fellow Brad Setser estimated last month that the Chinese currency is undervalued by 20%, fuelling calls for Beijing to allow the yuan to strengthen further.
Group of 20 finance ministers gathered in the U.S. earlier this month and issued a joint statement criticising 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,” as tensions with Western trading partners continue to simmer.
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.
Neo Wang, China strategist at Evercore ISI, expects growth to regain momentum in the second half of this year, encouraged by the “sense of urgency and determination in Beijing’s recent policy communications.”
Beijing set a target range of 4.5% to 5% for gross domestic product 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.
Fiscal spending has accelerated in recent weeks, and Chinese government plans to fund a $54 billion capital injection into several state-owned banks and insurers as Beijing seeks to bolster growth with constrained stimulus.
Shan Guo, a partner at China-focused Hutong Research, expects one or two interest-rate cuts by year-end, with the pace tied to Federal Reserve policy moves, Ministry of Finance bond issuance, and the yuan’s pace of appreciation.