China’s economy picks up in June on rebounding U.S. exports: analysts

China’s economy is on the road to recovery, with signs of improvement in various sectors thanks to a rebound in shipments to the U.S. According to the China Beige Book, an independent survey of Chinese businesses, manufacturing has seen a clear improvement and retail sales have bounced back nicely. The survey, conducted from June 1 to 22 and covering 1,321 businesses, highlighted a surge in luxury goods sales but noted weaker tourism-related spending.

Although the second quarter started off on a slow note, there are positive developments towards the end of the quarter. However, the report emphasizes that this performance needs to be sustained in July and August for a legitimate cause for celebration. After a strong first quarter, China’s economy experienced a slowdown in April and May, with retail sales falling for the first time since the pandemic and a decline in investment in manufacturing.

Nevertheless, June brought some positive news as factory activity accelerated, with U.S.-bound orders witnessing significant year-on-year gains. China’s exports to the U.S. have been increasing in recent months, following a period of decline when President Donald Trump imposed tariffs on Chinese goods. This uptick in exports has led to an increase in freight rates for shipping between Asia and the U.S., reaching their highest levels in nearly two years.

While export order growth to Asia and other developing countries slowed in June, growth to Europe remained steady. The meeting between Trump and Chinese President Xi Jinping suggests that tariffs may remain lower for the time being, with no additional duties imposed under Washington’s Section 301 probes targeting countries with overcapacity and forced labor practices.

Businesses are rushing to ship goods to the U.S. before potential tariffs increase, reflecting a trade recovery as China’s exports to the U.S. in May reached nearly 90% of 2024 levels. The improved momentum in June, driven primarily by the external sector, is expected to continue with strong demand for AI technology and falling oil prices.

Looking ahead, China is set to release retail sales, industrial data for June, and second-quarter GDP figures on July 15, with trade data expected to be reported on July 14. The National Bureau of Statistics will release the official manufacturing purchasing managers’ index, which is anticipated to show expansionary territory in June. Goldman Sachs has revised its third-quarter GDP growth forecast to 5%, citing lower oil prices and faster fiscal spending in the coming months.