China’s August exports growth slowest in 6 months, missing forecasts

(Corrects monthly trade surplus figure of $98.24 billion to July, not June, in paragraph 14)

China's exports growth slowed to a six-month low in August, as a brief boost from a tariff truce with the U.S. faded, but demand elsewhere provided officials some relief as they try to underpin an economy facing low domestic demand and external risks.

Policymakers are counting on manufacturers to diversify into other markets in the wake of U.S. President Donald Trump's erratic trade policy, enabling them to delay from rolling out additional fiscal support in the fourth quarter.

Outbound shipments from China rose 4.4% year-on-year in August, customs data showed on Monday, missing a forecast 5% increase in a Reuters poll and marking the slowest growth in six months. They compared with July's better-than-expected 7.2% increase.

Imports grew 1.3%, following 4.1% growth a month earlier. Economists had predicted a 3.0% rise.

"I would say the number is still decent, and the resilience of exports has certainly lasted longer than we had expected," said Xu Tianchen, senior economist at the Economist Intelligence Unit.

Trump's tariff threats pose a stern test to China's export-oriented economy, but policymakers are loathe to implement difficult but much-needed economic reforms under external pressure, analysts say.

The world's two largest economies agreed on August 11 to extend their tariff truce for another 90 days, locking in place U.S. levies of 30% on Chinese imports and 10% Chinese duties on U.S. goods, but they appear to be struggling to chart a path beyond the current pause.

Once Trump's tariffs top 35%, they become prohibitively high for Chinese exporters, economists warn.

A visit by senior Chinese trade negotiator Li Chenggang to Washington late last month yielded little of substance.

"Exports are holding up well so far," said Dan Wang, director for China at Eurasia Group. "Shipments to the U.S. are down, but other routes are even better than last year. Lots of exports are also tied to Chinese factories going overseas and importing raw materials and other inputs from China," she added.

China's exports to the U.S. fell 33.12% year-on-year in August, the customs data showed, while its shipments to Southeast Asian nations rose 22.5% in the same period.

Chinese producers are trying to export more to markets in Asia, Africa and Latin America to offset the impact of Trump's tariffs, but no other country comes even close to U.S. consumption power, which once absorbed over $400 billion of Chinese goods annually.

And with Trump in July threatening a 40% penalty tariff on goods deemed to be transshipped from China to the U.S. to evade his earlier levies, how long Chinese factory owners can continue to find buyers that way remains to be seen.

China's August trade surplus came in at $102.3 billion, from $98.24 billion in July, but still well below June's $114.8 billion.

Analysts are watching to see whether officials will roll out additional fiscal support in the fourth quarter to spur domestic demand.

But policymakers seem to be exercising tighter control over their flagship 'cash-for-clunkers' programme and did not rush replenish funds after several local governments recently ran through the allocation set aside for the scheme.

(Reporting by Joe Cash; Editing by Kim Coghill and Shri Navaratnam)