China adapting to the new world order

We know that China’s president has for several years sought to rely heavily on exports to stimulate GDP growth, because of sluggish domestic consumer spending and the crisis in China’s real-estate sector that has been going on for years. Beijing has also invested massively in manufacturing in an attempt to meet its GDP growth target of around 5% in 2025. Recently released export figures for June show that these policies have been successful, because exports were up 5.8% year on year in dollar terms, exceeding expectations. Companies used the tariff truce with the United States to ship goods ahead of the August deadline for reaching a definitive trade deal. China is adapting to the new world order and is clearly trying to plot a path through the current geopolitical turmoil.

Shifting trade patterns

Although Beijing did not immediately publish dollar-denominated figures regarding China’s trade with some countries, its exports to the United States were down 9.9% year on year in renminbi terms between January and June, while imports were down 7.7%. Exports to the EU, however, were up 7.9% in renminbi terms in the first half of the year. This is likely to cause great anxiety in Europe, whose greatest fear is to be “flooded” with Chinese goods no longer being shipped to the US because of the ongoing but permanently delayed trade war.

China’s international trade figures could also prompt the US administration to raise tariffs on China and Southeast Asian countries, which it accuses of authorising the transshipping or rerouting of Chinese goods in order to get them into the United States. China’s exports to ASEAN (Association of Southeast Asian Nations) countries increased by 14% in the first six months of 2025.

Record trade surplus in the first quarter

Official Chinese figures show a record trade surplus of $586 billion in the first half of 2025, due to a combination of weak imports resulting from sluggish domestic demand and resilient exports. However, we also know that Chinese exports of robots have increased considerably, confirming the success of China’s industrial policy as regards leading-edge manufacturing. Trends in global technology and global demand for these products will inevitably provide strong support to China’s trade figures in the future.

Finally, we are awaiting the outcome of Donald Trump’s trade war. It seems likely that the resulting trade tensions will hold back China’s output in the next few months, unless they are offset by new stimulus and diversification measures – such as lower interest rates, huge increases in public spending and efforts to maintain a weak renminbi – which have become common in China over a period going back more than five years.