China’s exports rise at fastest pace in over a year

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China’s exports grew at their fastest pace in more than a year last month, as trade remained a rare bright spot for the world’s second-largest economy despite rising tensions with Europe and the United States.

Exports rose 8.6 percent year-on-year in dollar terms in June, data from the National Bureau of Statistics showed on Friday, accelerating from 7.6 percent in May and marking the strongest expansion since March 2023. The figure beat expectations, with a Reuters poll of analysts forecasting 8 percent growth.

Imports fell 2.3 percent year-on-year in June, well below economists’ expectations for 2.8 percent growth and a 1.8 percent expansion in May.

The figures show China’s trade surplus reached $99.05 billion, beating expectations of $85 billion and a record for a single month, according to Goldman Sachs analysts. During the first six months of the year, exports rose 3.6 percent and imports rose 2 percent compared to the same period in 2023.

Policymakers in Beijing have increasingly relied on exports and manufacturing as China’s economy struggles with weak domestic demand and a prolonged property slowdown. The Communist Party leadership is preparing to convene a closely watched economic policy conference that begins Monday.

Trading partners in the United States and Europe have responded to the surge in low-cost Chinese exports by tightening trade restrictions.

In May, the United States announced it would sharply increase tariffs on $18 billion worth of Chinese imports, including a 100% duty on Chinese electric vehicles, while in June the European Union announced additional measures that would raise some tariffs on Chinese electric vehicles to nearly 50%.

Analysts said continued strong exports coupled with relatively weaker imports pointed to an unbalanced economic recovery. China’s consumer price growth slowed in June, rising just 0.2 percent year-on-year, while factory prices remained in contraction territory for the 21st straight month.

Some experts have suggested that the surge in Chinese exports in recent months may be driven by manufacturers front-loading shipments in an effort to avoid expected tariff increases in the United States, which are set to take effect in August.

The disruption of shipping routes through the Red Sea by Houthi militants in Yemen has prompted some Chinese exporters to send goods early in a bid to ensure timely delivery during the Christmas rush.

“Pre-loaded exports amid heightened trade policy uncertainty may have supported exports on the margins as well, although their contribution is difficult to quantify,” Goldman Sachs analysts wrote in a note.

In recent years, the elite Central Committee of the Communist Party of China has used the Third Plenary Session to address pressing economic issues, with some observers calling for stronger measures to stimulate domestic demand and restore business and investor confidence.

But Li Keqiang, China’s premier, has tempered expectations of radical intervention, saying at a World Economic Forum event last month that the country’s economy should be allowed to “gradually recover.”

Lin Song, chief economist for Greater China at ING Bank, noted that export growth was supported by shipments of automobiles and semiconductors, while imports were depressed by agricultural products and property-related goods such as lumber and steel.

“Import growth has been largely unbalanced since the beginning of the year,” he said, adding that tariffs imposed by the United States and the European Union could lead to a slowdown in auto exports by the end of this year.

But analysts at Capital Economics predicted the tariffs, which cover only a small portion of Chinese goods, would have a limited impact in the near term as exporters rerouted shipments. “Overall, we expect exports to remain a tailwind for economic growth in the near term,” they wrote.