China’s economy grows 5.2% as resilient exports counter weak domestic demand

The Chinese economy grew by 5.2% year-on-year in the second quarter, as the resilience of exports helped compensate for sluggish domestic demand in the world’s second-largest economy.

The growth rate, which slightly exceeded the average forecast of 5.1% from analysts polled by Reuters but fell short of the 5.4% growth in the first quarter, keeps Beijing on track to meet its year-end target of around 5% growth.

China, which needs strong exports and manufacturing to offset a slowdown in the real estate sector that is weakening domestic demand, is entering a critical period in the coming weeks as it finalizes a trade deal with the US.

ANZ economist Arindam Chakraborty noted in a report published before the GDP figures were released that the biggest challenge in the second half is “uncertainty regarding US trade policy, which could negatively affect China’s net export contribution.”

“However, policymakers will continue to fine-tune counter-cyclical measures to achieve the annual 5% growth target in 2025,” he added.

On Monday, China announced strong second-quarter trade figures after a ceasefire in the trade war allowed manufacturers to ship more goods abroad.

However, the US is trying to curb China’s exports by imposing high tariffs on transshipments or by rerouting shipments from China to America through third countries like Vietnam.

Despite this, JPMorgan analysts wrote in a note, “The outperformance of exports proves to be a significant support for China’s growth, even as momentum slowed in the second quarter.”

Beijing also aims for the Chinese economy to transition from an export and manufacturing-focused model to a high-tech-oriented development model.