China’s trade surplus trounced expectations in August after year-on-year exports increased by 8.7% but imports were almost flat.
Forecasters had expected total export growth to be a flat 7%, but double-digit growth in household appliances, aluminium, general machinery and integrated circuits led to these forecasts being smashed.
As a result, China’s balance of trade exceeded $91 billion, up from less than $84 billion in July and more than 34% higher year on year.
This is despite persistent trade tension with the US- where the surplus widened to $33.81 billion in August from $30.84 billion in July.
Exports to the European Union rose by 13.4% year on year.
A lack of domestic demand for foreign goods contributed significantly to the surplus.
Imports increased just 0.5%, much lower than 2% growth expectations, primarily because of falling demand for EU-originated goods amid a drought in luxury demand.
Imports of rare earth materials were also notably poor, having fallen by nearly a third.
China is the largest global producer of rare earths, but the US still commands a large share of the global market, alongside Australia and emerging economies across Asia and Africa.
Looking forward, Pantheon Macroeconomics’ senior China economics Kelvin Lam stated: “On balance, we expect Chinese export growth to ease moderately in Q4, due to the higher base over the same period last year.
“Also, the slowdown in US demand — which accounts for 15.3% of total exports in August — will inevitably weigh on Chinese export growth.
“Admittedly, the slacking US market is somewhat offset by a rebounding EU market and China’s pivot towards non-traditional markets.
“We continue to think China’s export growth strategy will face challenges in the next few quarters, thanks to geopolitical/trade tensions with the West, especially in a US election year.”