China’s export machine shows resilience despite August growth slowdown
China’s August export print wasn't as bad as the headline figures suggest.
Per data released by the customs bureau (GAC) on Monday, in August:
- Exports grew 4.4% y/y – the slowest growth rate in six months, and down sharply from July’s 7.2% growth
- Imports expanded 1.3% y/y – down from 4.1% growth the previous month
US-China trade tensions are taking their toll: Shipments to the US plummeted 33.1% y/y last month – accelerating from July’s 21.7% fall.
Not great, but we're still pretty bullish about China’s trade outlook – and here's why.
First, while shipments to the US collapsed, exports to other markets surged. Specifically, exports to:
- Africa grew 25.9% y/y
- ASEAN grew 22.5%
- The EU expanded 10.4%
Second, exporters are moving up the value chain.
- High-tech, high-value-added exports – such as semiconductor chips, autos, and ships – all clocked double-digit growth.
- At the same time, low-value-added exports – like toys, textiles, and footwear – fell.
Third, export growth is consistently outpacing import growth, driving up the trade surplus.
- China logged a USD 102.3 billion surplus in August, up 11.8% y/y.
- At this pace, the annual surplus could top USD 1.2 trillion in 2025, providing a major boost to GDP growth.
Get smart: Exports will continue driving China's economic growth, providing an offramp for surplus industrial production across the rest of the year.
Get smarter: Still, without a resolution to US-China trade tensions, export growth will inevitably slow.
- Ultimately, emerging markets cannot match the scale and purchasing power of the US.
- Washington's crackdown on transshipments, meanwhile, will narrow Chinese manufacturers' ability to reroute their exports.
