China's trade surplus grew to $114.7 billion last month

Gulf Today

5 days ago

China's exports regained momentum in June as firms rushed out orders to capitalise on a fragile tariff truce between Beijing and Washington ahead of a looming deadline next month, with shipments to Southeast Asian transit hubs particularly strong.
Businesses on both sides of the Pacific are waiting to see whether the world's two largest economies can agree on a more durable deal or if global supply chains will again be upended by the reimposition of duties exceeding 100%.
Chinese producers, facing weak demand at home and harsher conditions in the United States, where they sell more than $400 billion worth of goods annually, are also hedging their bets and racing to grab market share in economies closer to home.
Customs data on Monday showed outbound shipments from China rose 5.8% year-on-year in June, beating a forecast 5.0% increase in a Reuters poll and May's 4.8% growth.
'There are some signs that frontloading demand is beginning to wane gradually,' said Chim Lee, senior analyst at the Economist Intelligence Unit. 'While frontloading ahead of the August tariff pause deadline is likely to continue, freight rates for China-bound shipments to the US have started to decline.'
'Trade diversion and rerouting appear to be continuing, which will attract the attention of policymakers in the US and other markets,' he added.
Imports rebounded 1.1%, following a 3.4% decline in May. Economists had predicted a 1.3% rise.
The upbeat set of data helped lift market sentiment with the blue-chip CSI300 up 0.2% at the midday trading break, while the Shanghai Composite Index gained 0.4%, nearing its highest level since October.
Analysts and exporters are watching to see whether a deal agreed in June between US and Chinese negotiators will hold, after an earlier agreement reached in May was strained by a series of export controls that disrupted global supply chains for key industries.
Exports to the US grew 32.4% month-on-month, with June the first full month of Chinese goods benefitting from reduced US tariffs, although year-on-year growth remained negative.
Meanwhile, outbound shipments to the 10-member Association of Southeast Asian Nations jumped 16.8%.
China's June trade surplus came in at $114.7 billion, up from $103.22 billion in May. China's rare earths exports rose 32% in June from the month before, the customs data showed, in a sign that agreements struck last month to free up the flow of the metals were possibly bearing fruit.
But Chinese negotiators will struggle to talk the US into bringing tariffs down to levels that enable producers to turn a profit, analysts say, warning additional duties that exceed 35% will wipe out margins.
'Tariffs are likely to remain high and Chinese manufacturers face growing constraints on their ability to rapidly expand global market share by slashing prices,' said Zichun Huang, China economist at Capital Economics.
'We therefore expect export growth to slow over the coming quarters, weighing on economic growth,' she added.
Beijing faces an August 12 deadline to reach a durable deal with the White House.
In the meantime, Trump continues to broaden his global trade offensive with new tariffs on other partners.
Analysts warn those measures could indirectly hurt Beijing by pressuring third countries used heavily for transshipments of Chinese goods.
Trump recently unveiled a 40% tariff on US-bound transshipments through Vietnam, a move that could undermine Chinese manufacturers looking to reroute shipments and avoid higher duties.
The US president has also threatened a 10% charge on imports from BRICS countries, in which China is a founding member, raising further risks for Beijing.
Backing its fellow BRICS member, China's soybean imports in June hit a same-month record high, buoyed by a surge in purchases from top supplier Brazil to 9.73 million tonnes, which Trump has slapped with 50% tariffs. Imports of US soybeans, meanwhile, were just 724,000 tonnes.
China's crude oil imports rebounded last month and reached the highest daily rate since August 2023, after refineries from Saudi Arabia and Iran increased operations. Iron ore imports climbed 8% from May.
Meanwhile Chinese banks extended 2.24 trillion yuan ($312 billion) in new loans in June, more than triple May's total, and beating analysts' forecasts, helped by stimulus measures and a trade truce with the United States.
Analysts polled by Reuters had predicted new yuan loans would reach 1.8 trillion yuan in June after 620 billion yuan in May. In the event, it also surpassed last June's 2.13 trillion yuan.
Reuters