The situation: Despite persistent US-China trade tensions, the Chinese economy is proving more resilient than many expected.
By the numbers:
- Exports rose 5.8% YoY in June, beating expectations and improving on May’s 4.8% increase, per China’s General Administration of Customs. Those gains came despite a 16.1% drop in shipments to the US, largely due to the 55% tariffs now imposed on most Chinese goods.
- GDP growth is projected to reach 5.1% YoY in Q2, per economists surveyed by Bloomberg. While that’s a modest step down from 5.3% in Q1, it remains above Beijing’s 5% full-year target.
- Retail sales are forecast to rise 5.3% YoY in June, down from 6.4% in May. The decline likely reflects the end of subsidies in several provinces for purchases of smartphones, home appliances, and cars, along with a calendar shift from JD.com’s mid-year sale, which began weeks earlier than last year, likely pulling forward some demand.
Why it matters: China’s stronger-than-expected Q2 performance provides Beijing with breathing room at a particularly fraught moment.
With GDP growth running above target, and export momentum holding despite steep tariffs from the US, policymakers may now have the flexibility to scale back stimulus efforts—at least temporarily. That would preserve some fiscal firepower should trade tensions escalate again next month, when the current 90-day tariff rollback period ends.
Meanwhile, the shift in export demand toward non-US markets, particularly the EU, underscores China’s effort to diversify its trade relationships and insulate its economy from bilateral pressure.
Our take: China is navigating a high-stakes global environment more deftly than expected—a promising sign for Chinese retailers.
Stronger-than-anticipated export growth, solid GDP performance, and growing trade diversification point to a more stable macroeconomic backdrop. That creates an opportunity for Chinese retailers and manufacturers to tap into rising domestic demand while expanding into alternative export markets.