By Joe Cash
BEIJING- China’s exports grew at their fastest in fifteen months in June, suggesting manufacturers are front-loading orders ahead of tariffs expected from a growing number of trade partners, while imports unexpectedly shrank amid weak domestic demand.
The mixed trade data keeps alive calls for further government stimulus as the $18.6 trillion economy struggles to get back on its feet. Analysts warn that the jury is still out on whether strong export sales in recent months can be sustained given major trade partners are becoming more protective.
“This reflects the economic condition in China, with weak domestic demand and strong production capacity relying on exports,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
“The sustainability of strong exports is a major risk for China’s economy in the second half of the year. The economy in the US is weakening. Trade conflicts are getting worse.”
Outbound shipments from the world’s second-biggest economy grew 8.6 percent year-on-year in value in June, customs data showed on Friday, beating a forecast 8.0 percent increase in a Reuters poll of economists and a 7.6 percent rise in May.
But imports hit a four-month low, shrinking 2.3 percent compared with a forecast 2.8 percent increase and a 1.8 percent rise the previous month, highlighting the fragility of domestic consumption.
Stronger-than-expected exports have been one of the few bright spots for an economy otherwise struggling for momentum despite official efforts to stimulate domestic demand following the pandemic. A prolonged property slump and worries about jobs and wages are weighing heavily on consumer confidence.
Still, as the number of countries stepping up curbs on Chinese goods increases, so too does the pressure on its exports to prop up progress towards the government’s economic growth target for this year of around 5 percent .
China’s trade surplus stood at $99.05 billion in June, the highest in records going back to 1981, compared with a forecast of $85 billion and $82.62 billion in May. The United States has repeatedly highlighted the surplus as evidence of one-sided trade favoring the Chinese economy.
Washington in May hiked tariffs on an array of Chinese imports, including quadrupling duties on Chinese electric vehicles to 100 percent. Brussels last week confirmed it would impose tariffs on EVs as well, but only up to 37.6 percent.
Chinese exporters are also on edge heading into US elections in November in case either major party tips fresh trade restrictions.
Turkey last month announced it would impose a 40 percent additional tariff on Chinese-made EVs, and Canada said it was considering curbs.
Meanwhile, Indonesia plans to impose import duties of up to 200 percent on textile products, which come mainly from China; India is monitoring cheap Chinese steel; and talks with Saudi Arabia over a free trade agreement have reportedly stalled over dumping concerns.
The miss on imports might not bode well for exports in the coming months, as just under a third of China’s imports are parts for re-export, particularly in the electronics sector.
China took in only slightly more chips in June in volume terms than it did a year earlier, suggesting China’s heavy investment in expanding production of older chips – known as legacy chips and which can be found in everything from smartphones to fighter jets – is warping supply and demand.
