China leaned on its sales abroad again in August. Shipments overseas increased 25% from a year earlier, in line with a Reuters poll and faster than July's 23.9% gain. Imports grew 28.2%, an uptick from 27.5% in July but shy of the 30% consensus. As a result, the monthly trade surplus widened to $119.09 billion, up from $112.5 billion in July.
The offshore yuan barely budged on the release, trading around 6.7099 per dollar. It has appreciated 3.8% against the U.S. currency so far this year.
By CNBC's tally of official data, exports to the U.S. jumped 34.4% in August, while imports from the U.S. rose 17.8%. Sales to the European Union increased 6.6% and purchases from the bloc edged up 0.7%.
Regional flows were even punchier. China bought more than twice as much from South Korea as a year ago and sold nearly 50% more to Korea. A global rush to build AI infrastructure has revved up demand for advanced components, turning exports into the economy's main growth engine despite geopolitical strains, weak household spending, and a slump in investment.
At Pinpoint Asset Management, the president and chief economist, Zhiwei Zhang, said, "China continues to rely on exporters to support the economy," adding that domestic demand is still weak and warning of increasing overseas pushback against Beijing's trade imbalances.
That hefty surplus is feeding calls for a stronger currency. Brad Setser, a senior fellow at the Council on Foreign Relations, estimated last month that the yuan is undervalued by 20%.
Scrutiny is rising too. In the U.S. earlier this month, finance chiefs from the Group of 20 met and, through a joint statement, criticized economies that rely heavily on exports. China was the lone holdout. Beijing dismissed the complaints as "an excuse to pressure and restrict China."
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At the same gathering, People's Bank of China Governor Pan Gongsheng said China has not sought a surplus or weakened the currency to juice competitiveness, and he stressed the market would stay open to foreign firms.
Despite tensions, Washington's frustration is unlikely to upend relations ahead of Chinese leader Xi Jinping's planned visit to Washington D.C. later this month, according to Evercore ISI's China strategist Neo Wang, who pointed to America's narrowing deficit with China and its widening trade spats elsewhere.
Neo Wang expects growth to improve modestly over the year's second half, citing a clear sense of urgency in Beijing's messaging and signs that factory activity steadied in August. Policymakers are aiming for 4.5% to 5% GDP growth in 2024, after the pace slowed to 4.3% in the second quarter, the weakest in more than three years.
Recent data showed domestic demand and investment deteriorated further in July and manufacturing shrank for a second month. In response, fiscal outlays have picked up in recent weeks, which Wang said is helping stem the investment slide and stabilize conditions. Plans are also in place to channel about $54 billion into several state owned banks and insurers to support growth with restrained stimulus.
Economists see room for more monetary easing this year. Shan Guo at Hutong Research expects one or two rate cuts by December, depending on the Federal Reserve's moves, Ministry of Finance bond supply, and how quickly the yuan strengthens. Guo added that a faster-appreciating yuan gives the PBOC greater space to trim rates even if the Fed continues to raise rates.
The takeaway for everyday investors: exports are doing the heavy lifting, the currency is firming, and Beijing is leaning on targeted fiscal support with the option of modest rate cuts. That combo tends to ripple through everything from chipmakers to commodities to companies tied to global shipping.
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