China's imports in August miss estimates as exports pick up pace amid calls for rebalancing trade

China’s trade growth strengthened in August, but weaker-than-expected imports suggested domestic demand remains fragile as policymakers face pressure to rebalance the economy. Exports rose 25% year over year in U.S. dollar terms, matching the Reuters-polled forecast and accelerating from July’s 23.9% increase. Imports climbed 28.2%, below economists’ 30% estimate but above July’s 27.5%. The trade surplus widened to $119.09 billion from $112.5 billion. Shipments to the United States surged 34.4%, while imports from the country increased 17.8%, according to CNBC’s calculation of official data. Exports to the European Union grew 6.6%, while imports rose 0.7%. Imports from South Korea more than doubled, and exports increased nearly 50%. Exports remain China’s primary growth engine. Demand for high-tech components linked to the global build-out of artificial-intelligence infrastructure is cushioning weakness from geopolitical shocks, soft domestic demand and declining investment, said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. The offshore yuan was little changed at 6.7099 per dollar after the release, though it has gained 3.8% against the greenback this year. The surplus has intensified calls for a stronger currency; Brad Setser of the Council on Foreign Relations estimates the yuan is undervalued by 20%. Western partners have urged China to reduce its surplus and boost domestic demand. G20 finance ministers criticized export-dependent economies, with China the only dissenting member. Beijing called the complaints an excuse to pressure and restrict China. PBOC Governor Pan Gongsheng said China had not pursued a surplus or weakened the currency for competitiveness. Neo Wang of Evercore ISI expects growth to regain momentum as policy urgency increases and manufacturing stabilizes. China targets 4.5%-5% growth this year after second-quarter growth slowed to 4.3%, a more than three-year low. Fiscal spending has accelerated, alongside plans for a $54 billion capital injection into state-owned banks and insurers. Shan Guo of Hutong Research expects one or two rate cuts by year-end, depending on Federal Reserve policy, Ministry of Finance bond issuance and yuan appreciation. Xi Jinping is scheduled to visit Washington later this month.