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BEIJING: China’s exports beat expectations in July, remaining a key driver of economic growth as the global AI infrastructure boom fuelled demand for high-tech goods and exporters rushed shipments ahead of higher US tariffs.
The manufacturing powerhouse has been relying on external demand to sustain growth and counter tepid domestic consumption and an investment downturn, but frictions in China’s relations with trading partners may prompt further protectionism in an uncertain global environment due to war in the Middle East.
China’s exports expanded 23.9% year-on-year in US dollar value terms in July, customs data showed yesterday, slowing from a 27% surge the previous month and compared with a 22.2% rise forecast in a Reuters poll.
Imports were up 27.5% from July last year, slowing from the 36% jump in June and in line with an expected 27.9% gain.
The US last month banned imports of new humanoid and quadruped robots and connected power inverters from China, and on Thursday imposed price floors and a 15% tariff on products made from polysilicon, the raw material used in semiconductors and solar panels that is primarily produced by China.
“The latest US measures will have limited overall impact on Chinese exports due to a more diversified structure to other markets, such as Europe and Asean,“ said Gary Ng, senior Asia-Pacific economist at Natixis.
He cautioned that the measures could drag on certain sectors, and that “the growing trade imbalance can prompt more countries to impose protectionist measures.”
The Chinese yuan hovered near a 3½-year high while stocks gained following the data.
Analysts expect AI demand, which drove up the prices of related goods, to underpin strong export growth in the third quarter and even the second half.
Exports of semiconductors in the first seven months almost doubled in value terms from last year, and overall high-tech exports expanded 40.7%, customs data showed.
Ceramic shipments slumped 28.3% and exports of toys fell 9.7%, in a further sign of the economy’s uneven development where advanced manufacturers ride the AI boom but more traditional industries struggle due to soft demand.
China’s GDP growth slowed to 4.3% in the second quarter, below Beijing’s official full-year target of 4.5% to 5%.
“External demand has become increasingly important this year for the growth outlook as China’s K-shaped divergence widens,“ said Lynn Song, chief Greater China economist at ING.
In a meeting late last month, China’s top decision-makers called for a faster transition from old growth drivers to new ones, signalling priority on high-tech sectors.
Exports of cars rose more than 50% in both value terms and quantity, driven by Chinese automakers’ aggressive expansion abroad as domestic demand remained subdued.
China’s crude oil imports fell 24.3% year-on-year in July but rose from June’s near-decade low, as cheaper barrels bought after the Strait of Hormuz reopened for a brief period in June arrived.
Chinese officials have repeatedly pledged to expand imports and promote balanced trade, yet the country’s trade surplus, on track to top US$1 trillion (RM4.1 trillion) for a second year, continued to unnerve trading partners concerned about disruptions to their own domestic industries.
China’s trade surplus narrowed to US$112.5 billion from US$125.62 billion in June. Its trade surplus with the US narrowed slightly to US$28 billion in July from US$28.86 billion the previous month.
Exports to the US increased 17% from the same month last year. Outbound shipments to the European Union rose 16%, while imports from the bloc dropped 1.4%. Trade with South Korea maintained robust growth in July, with exports up 46.6% and imports up 97.8%, on high-tech demand.
Chinese exporters and US importers continued to front-load shipments in July as they expected Washington’s tariffs on Chinese goods to rise after the expiry of a 10% temporary global levy in late July, said Xu Tianchen, a senior economist at the Economist Intelligence Unit. – Reuters
