Exports Are Strong, But the Economy Is Sluggish: The Current State of "Discrepancy"

In the July-September period (Q3), the Chinese economy likely slowed to its lowest growth level of the year, even as exports maintained their momentum. Ahead of a key party meeting, the leadership is expected to focus on boosting household consumption. Bloomberg reported on the "discrepancy" between the export boom and growth slowdown, citing the real estate slump, weak domestic demand, and deteriorating external environment as underlying factors. Bloomberg

1) "Export Boom" in Data

According to the latest statistics from Chinese customs, exports in September increased by 8.3% year-on-year, surpassing market expectations (+6%) and marking the highest growth since March. Imports also rebounded with a 7.4% increase. However, this recovery may include the effects of front-loading shipments before tariffs and export restrictions, as well as thin-margin sales due to price competition. Reuters

2) Decline in Exports to the U.S. and Market Shift

On the other hand, exports to the U.S. in September fell by 27%. Due to prolonged geopolitical and trade conflicts, the focus of exports has shifted to Southeast Asia, Latin America, and Africa. This "decoupling × redirection" may increase volumes but is unlikely to improve profitability, with limited spillover effects on domestic investment and employment. AP News

3) Why Growth Slows Even When Exports Are Strong

The biggest bottleneck is the household sector. Consumption is weak due to the real estate slump and the erosion of the wealth effect, and private investment is cautious. In manufacturing, where price competition is intensifying, profit margins are shrinking. The IMF recommends shifting fiscal focus from industrial policy expansion to measures that boost household disposable income (such as social security and revitalization of the service industry). The growth rate is projected to slow to 4.2% by 2026. Unless domestic demand shortfalls are addressed, overall growth is unlikely to rise, even if exports increase. Reuters

4) The Signal of "Involution"

In today's China, overproduction and price wars are becoming visible as "involution." Even in growth industries like EVs and solar energy, oversupply is squeezing profits and increasing downward price pressure (deflationary pressure). While export volumes may be high, the ability to generate profits is weakening, which is a factor that cannot stop the economic slowdown. The Wall Street Journal

5) The Politicization of Supply Chains and "Headwind Exports"

Exports are also exposed to geopolitical turbulence. In 2025, when regulations and restrictions on rare earth exports and related products expanded, retaliatory measures and sanctions increased uncertainty in quantity, price, and licensing. The decision of "where to produce what" for companies continues to be influenced not only by costs but also by political and security constraints. Reuters

6) Yet the Ports Keep Moving: The Content of Exports

The source of growth lies in intermediate goods, capital goods, EVs, batteries, renewable energy-related products, and some tech-related items, leveraging price competitiveness. However, the risks of anti-dumping measures and sanctions/regulations from the US and Europe are rising, and the boost from "export reliance" also contains instability factors (it is expected that mentions of consumption stimulation will increase at the party's key meeting). Bloomberg

7) Upcoming Checkpoints

• Key Party Meeting: How concretely household support and housing market boosts will be realized. Bloomberg

• External Demand in October-December: Whether the decline in exports to the US can be compensated by third markets. AP News

• Price Trends: Whether there are signs of the end of price wars and recovery of corporate margins. The Wall Street Journal
  
  

Reactions on Social Media (Key Points and Examples)

• Media Reports: Posts spreading that "exports are strong, but growth is likely the slowest this year" (Bloomberg thread). X (formerly Twitter)

• Market Accounts: Observations of Q3 slowdown highlight the "discrepancy between strong exports and weak domestic demand." X (formerly Twitter)

• Economist Circles: Michael Pettis repeatedly discusses the limits of the idea that "accelerating exports will save the economy," emphasizing the need for demand redistribution (increasing the household share). X (formerly Twitter)

• Policy Watchers: Attention is focused on the IMF's request to shift from industrial policy to consumption emphasis. Reuters

Supplement: Many posts emphasize the structure of "≠" rather than export boom = growth acceleration, highlighting export boom ≠ domestic demand recovery (see threads above).

Summary: The Key to Crossing Two Curves Is "Household"

The cranes at the port keep moving today. However, the engine of the economy cannot run on production and exports alone. By enhancing household purchasing power through wage, employment, and social security assurances, and thickening the ecosystem of service consumption—without this internal reboot, the export boom is likely to remain just a support for growth rates. As the IMF suggests, whether policy can shift its focus back to households will be the major issue in the next 1-2 years. Reuters