China's imports in August miss estimates as exports pick up pace amid calls for rebalancing trade

Primary Journalistic Dispatch & Direct Reporting

China's trade growth picked up in August, though imports missed expectations, a sign that domestic demand remains tepid as the world's second-largest economy faces mounting pressure to rebalance trade.

Exports grew 25% in U.S. dollar terms in August from a year earlier, official customs data showed Tuesday , in line with Reuters-polled analysts' forecast, quickening from 23.9% increase the previous month.

Imports rose 28.2% last month, missing economists' estimates of 30% in a Reuters poll, but gathering momentum from 27.5% in July. As a result, China's trade surplus swelled to $119.09 billion from $112.5 billion in July.

In-Depth Developments & Factual Context

Chinese shipments to the U.S. surged 34.4% in August, extending the double-digit gains for most of this year, while imports grew 17.8%, according to CNBC's calculation of official data. The exports to the European Union expanded 6.6% while imports ticked higher by 0.7% last month. China's imports from South Korea more than doubled last month while exports jumped nearly 50%.

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 the drag from geopolitical shocks, sluggish domestic demand and a slump in investment.

"China continues to rely on exporters to support the economy" as domestic demand remains subdued, said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, noting the mounting pushback from governments globally over its trade imbalances.

Industry Impact & Strategic Analysis

The offshore yuan barely moved after the data release on Tuesday, standing at 6.7099 per U.S. dollar. The Chinese currency has outperformed its Asian peers this year, strengthening 3.8% year to date against the greenback.

China's exorbitant surplus has fueled calls among economists and foreign officials for Beijing to strengthen its deeply undervalued yuan, which has contributed to its export boom. Council on Foreign Relations senior fellow Brad Setser estimated last month that the Chinese currency is undervalued by 20% .

The breakout performance in China's exports has drawn scrutiny from Western trading partners, demanding that Beijing rebalance its trade and boost domestic demand.

Forward Outlook & Market Perspective

Group of 20 finance ministers gathered in the U.S. earlier this month and issued a joint statement criticizing 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."

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. He added that the country's market would remain open for foreign businesses.

Washington's frustration over trade relations, however, is unlikely to derail the bilateral relationship ahead of a high-stakes visit by Chinese leader Xi Jinping to Washington D.C., scheduled later this month, Wang said, citing the U.S.' s narrowing deficit with China and its mounting trade disputes with other trading partners.

Neo Wang, China strategist at Evercore ISI, expects growth to regain some momentum in the second half of this year, encouraged by the "sense of urgency and determination in Beijing's recent policy communications," as well as stabilizing manufacturing activity in August.

Beijing set a target range of 4.5%-5% for China's gross domestic product growth this year, but momentum has sputtered after a solid start to the year, with growth slowing to a more than three-year low of 4.3% in the second quarter.

Data released last month showed domestic demand and investment weakened further in July, while manufacturing activity contracted for a second straight month.

Reporting synthesized and verified under Nexvoro.tech editorial guidelines. Full primary records referenced via Google News US Business & Markets.