China's export juggernaut hits international resistance
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Shoshana Gordon/Axios
China's economy grew faster than expected in the third quarter, extending a yearslong pattern in which surging exports have compensated for weak spending and investment at home.
Why it matters: The stronger that China's economy performs, the less pressure Beijing faces to address the domestic imbalances that have made it so reliant on selling goods abroad.
- But what is working for China is becoming harder for its trading partners to tolerate, raising the prospect that its growth model is reaching political and economic limits overseas.
- The global AI investment boom is helping prop up China's export-driven growth model, though it creates another vulnerability if that spending slows.
By the numbers: China's GDP grew 4.5% in Q3 from a year earlier, up from 4.3% in the second quarter, according to the nation's official statistics. That puts Beijing on track to meet its full-year growth target, which it set at 4.5% to 5% in March.
- Industrial production rose 5.5% in September, far outpacing the 1.1% increase in retail sales, a sign of the persistent imbalance between what China produces and what Chinese consumers buy.
- Property investment plunged 20% in the first nine months of the year, while high-tech manufacturing output surged 14% — reflecting China's shift toward advanced manufacturing.
Between the lines: Fresh trade figures last week show the eye-popping pace at which China is selling goods to the rest of the world.
- Exports surged 36% in September, lifting the country's trade surplus to $938 billion through the first nine months of the year.
- The global AI boom is providing a powerful boost: Chips and computing equipment accounted for roughly a third of China's export growth last month, according to calculations by the Financial Times.
- China is likely set to top last year's $1.2 trillion trade surplus, the largest ever recorded by any country, even as its trading partners grow more concerned about the imbalance.
The big picture: European leaders last week backed plans for a new trade weapon — a "kill switch" — that could allow Brussels to swiftly block Chinese goods or companies from its market.
- It shows the mounting political pressure on one of China's biggest trading partners to protect domestic industries struggling to compete with a flood of Chinese imports.
- The European Union also reached an agreement with China last week to cap imports of Chinese hybrid vehicles at 350,000 annually — less than half the roughly 800,000 shipments projected for this year.
- European Commission president Ursula von der Leyen warned Friday that the EU's trade deficit with China, now exceeding €1 billion a day, is unsustainable and pledged further restrictions on Chinese imports.
- "Our industries have called for action, and we have heard them, and we will respond," von der Leyen said.
The bottom line: "As China's growth looks increasingly imbalanced, a slowdown in the tech capex cycle or new tariff shocks are the key risks to monitor moving forward for the year ahead," Lynn Song, chief economist for greater China at ING, wrote in a note.
