China’s trade surplus at record as exports beat expectations

China’s trade surplus rose to a record as exports grew faster than expected, easing some concerns over waning global demand and providing support for an economy battling sporadic Covid outbreaks and property woes.

The nation’s trade balance climbed to about $101 billion in July, surpassing the previous record set in June, according to government figures released Sunday. That’s the highest in data compiled since 1987. Exports in dollar terms grew 18% from a year earlier, beating economists’ estimates for a 14.1% gain.

“The strong export growth continues to help China’s economy in a difficult year as domestic demand remains sluggish,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management. Robust growth boosts confidence in the yuan exchange rate, which helps deter capital outflows, he said. 

China’s imports rose by 2.3%, compared with a 1% gain in June. That was lower than the median estimate for an increase of 4%, indicating weak domestic demand. Inbound shipments of commodities including soybeans, natural gas and copper declined on a monthly basis. Crude imports climbed, however.

Exports have been an important factor in China’s growth during the pandemic. But rising external uncertainties -- including a slowing global economy and high inflation within developed countries -- suggest their contribution to the economy this year will weaken. That complicates the picture for a country that’s already under tremendous strain.

China’s economy continued to rebound in July from Covid outbreaks and restrictions as bottlenecks in production and logistics eased further. Still, the recovery remained fragile, weighed down by a slowdown in the property sector, still-weak domestic demand and fresh virus flareups.

At a Politburo meeting last month, authorities said the country should strive for “the best outcome” possible for economic growth in 2022, releasing a statement that didn’t explicitly refer to the growth target of “around 5.5%,” which economists think is out of reach.

The same week as that meeting, China’s top leaders told government officials that the goal should serve as guidance rather than a hard target that must be hit, according to people familiar with the matter.