China's imports in August miss estimates as calls for rebalancing trade grow

China’s trade growth strengthened in August, but imports missed expectations, underscoring the domestic-demand challenge facing the world’s second-largest economy. Exports rose 25% year over year in U.S. dollar terms, matching the Reuters-polled forecast and accelerating from July’s 23.9% growth. Imports increased 28.2%, below economists’ 30% estimate but ahead of July’s 27.5%. The trade surplus consequently widened to $119.09 billion from $112.5 billion. Shipments to the United States surged 34.4%, while imports grew 17.8%, according to CNBC’s calculation of official data. Exports to the European Union rose 6.6%, and imports increased 0.7%. Imports from South Korea more than doubled, while exports climbed nearly 50%. Exports remain China’s primary growth engine. Demand for high-tech components tied to global AI-infrastructure expansion is cushioning geopolitical shocks, weak domestic demand and declining investment, but is also intensifying pressure from trading partners over China’s trade imbalance. Pinpoint Asset Management President and Chief Economist Zhiwei Zhang said China continues to rely on exporters while domestic demand remains subdued. Council on Foreign Relations senior fellow Brad Setser estimated the yuan is undervalued by 20%. The yuan has gained 3.8% against the dollar this year; the offshore rate stood at 6.7099 per dollar after the release. G20 finance ministers criticized export-reliant economies, while Beijing called the complaints an excuse to pressure and restrict China. People’s Bank of China Governor Pan Gongsheng said China has not pursued a trade surplus or weakened its currency for competitiveness. Evercore ISI strategist Neo Wang expects growth to regain momentum as manufacturing stabilizes and Beijing shows greater urgency. China targets 4.5%-5% GDP growth, but second-quarter growth slowed to 4.3%, a more-than-three-year low. Fiscal spending has accelerated, and Beijing plans a $54 billion capital injection into state-owned banks and insurers. Hutong Research partner Shan Guo expects one or two rate cuts by year-end, depending on Federal Reserve policy, Ministry of Finance bond issuance and yuan appreciation. Trade tensions remain a risk ahead of Chinese leader Xi Jinping’s scheduled Washington visit later this month.