Exports Drive Q2 Gains Amid U.S. Tariff Headwinds
China’s economy grew faster than expected in the second quarter, with gross domestic product rising 5.2% year-over-year, beating the 5.1% forecast from analysts. The National Bureau of Statistics attributed the growth to expanding exports and a recent trade truce with the United States. The first-half GDP now stands at 5.3%, giving China a slim cushion in its pursuit of the government’s “around 5%” annual target.
Chinese officials cited complex international dynamics and domestic challenges, including a weakening property sector, youth unemployment, and sluggish consumer spending. Despite headwinds, export diversification — especially to Southeast Asia — helped drive growth, even as shipments to the U.S. dropped sharply.
Export Recovery and Rare Earth Surge
June exports rose 5.8% year-over-year, aided by a temporary trade truce that allowed Chinese firms to reroute goods through ASEAN nations, particularly Vietnam. Exports to ASEAN jumped over 18%, while shipments to the U.S. fell 16.1%. Month-on-month, U.S.-bound exports surged 32% following the Geneva agreement that temporarily eased triple-digit tariffs.
Notably, exports of rare earth materials soared 32%, reflecting China’s move to unlock critical mineral flows after a separate deal with Washington in London. Imports also rose 1.1%, their first monthly increase since February, signaling tentative recovery in inbound demand.
Domestic Struggles and Deflationary Pressures
Despite positive export momentum, domestic indicators remain fragile. Retail sales slowed to 4.8% in June, down from 6.4% in May. Industrial output improved to 6.8%, but investment in the property sector plummeted 11.2% in the first half, reflecting continued housing market distress.
Deflationary concerns persist, with the Producer Price Index dropping 3.6% in June — the steepest fall in nearly two years. Consumer inflation remained flat at just 0.1%, lifted temporarily by government subsidies. Analysts warn that price wars and overcapacity are eroding profits, and prolonged deflation could hamper consumer confidence and investment.
New Jobs Plan to Ease Youth Unemployment
In response to economic and social pressure, China’s State Council rolled out new employment measures, targeting the country’s elevated youth jobless rate. While the official urban unemployment rate was 5% in June, the rate among 16 to 24-year-olds remained high at 14.9%.
Beijing announced subsidies of up to 1,500 yuan for companies that hire unemployed youth and pay full insurance for at least three months. Additional support includes personalized job matching, career guidance, and vocational training, as authorities attempt to address structural labor market imbalances