China's monthly trade surplus swelled to $125.6 billion in June, a new high, even as the economy grew at its slowest pace in more than a year. Gross domestic product expanded 4.3% in the second quarter from a year earlier, down from 5.0% in the first quarter and below the 4.5% analysts had expected. On a quarter-over-quarter basis, GDP rose just 0.9%.
Exports surge, imports climb faster
June exports jumped 20.8% year-over-year, while imports rose even more sharply at 29.4%. For the first half of the year, total trade in goods increased 16.9%, with exports up 13.4%. Mechanical and electrical products led the way, rising 20.1% and accounting for 63.5% of all goods exports. Private enterprises handled 57% of the country's total trade, and trade with Belt and Road partner countries grew 14.8%.
Domestic demand drags
The strong export numbers stand in stark contrast to the domestic picture. Fixed-asset investment fell 5.7% in the first half. Infrastructure investment dropped 2.4%, manufacturing investment slipped 1.2%, and real estate development investment plunged 18%. Retail sales managed only a 1.3% gain in the first six months. The property sector continues to weigh heavily: floor space sold fell 11.6%, and the value of newly built commercial property sales dropped 13.6%.
Private sector under pressure
Private investment, a key driver of economic activity, fell 8.5% in the first half. That decline, combined with cautious households and local governments, is creating a self-reinforcing cycle of weak domestic demand. Businesses are reluctant to invest when consumers aren't spending, and consumers are holding back because they're uncertain about the future.
High-tech investment a bright spot
Not all investment is shrinking. Spending on high-tech industries rose 4.6% in the first half, a sign that the government's push for advanced manufacturing is gaining some traction. But that modest increase does little to offset the broader weakness in real estate and private investment.
The question now is whether Beijing will roll out more stimulus to prop up domestic consumption and investment, especially as the property slump deepens.
