Key points
- August export growth slowed to 4.4%, below expectations and the weakest in six months.
- Weaker shipments to the U.S. contributed to the slowdown as the tariff truce effect fades.
- Imports also grew more slowly than anticipated at 1.3%. China’s trade surplus decreased despite the overall surplus remaining unchanged.
- Calls for further fiscal stimulus persist to bolster domestic demand.
China’s export growth significantly decelerated in August, falling to 4.4% year-on-year. This figure, released recently, fell short of analysts’ predictions of a 5% increase and marked the slowest growth in half a year, following a stronger-than-expected 7.2% rise in July.
The slowdown is largely attributed to reduced shipments to the United States, as the temporary boost from the tariff truce between the two economic giants begins to wane. This weaker-than-expected performance underscores ongoing concerns about the impact of the ongoing trade war on the Chinese economy and fuels calls for further government intervention.
The decline in exports to the U.S. reflects the ongoing uncertainty surrounding the trade relationship between the two countries. Despite a 90-day extension to the tariff truce agreed upon in August, substantial progress towards a lasting resolution remains elusive.
Economists warn that further tariff increases by the U.S. could severely cripple Chinese exports, exceeding the capacity of alternative markets to compensate for the loss. A recent visit by a senior Chinese trade negotiator to Washington yielded minimal tangible results, further highlighting the challenges in navigating these complex trade negotiations.
Adding to the economic pressure, China’s import growth also underperformed expectations, rising by just 1.3% compared to the projected 3.0% increase. This subdued import growth reflects a slowdown in domestic demand, further compounding the challenges facing Chinese policymakers.
While Chinese producers are actively seeking alternative export markets in Asia, Africa, and Latin America to mitigate the impact of U.S. tariffs, no single market possesses the consumption power of the United States, which previously absorbed over $400 billion in Chinese goods annually. The scramble to find new buyers has been described as a “mad rat race” by one exporter.
Consequently, although China’s August trade surplus reached $102.3 billion, it fell short of June’s $114.7 billion surplus, and adds further pressure for intervention. Analysts are now closely scrutinizing whether the government will implement additional fiscal stimulus measures in the fourth quarter to stimulate domestic demand and counteract the weakening export sector.
However, recent government actions suggest a more cautious approach to fiscal spending, raising questions about the extent and timing of potential future support.
