China's two-speed economy widens global trade imbalances

August 31, 2026 at 06:50 PM2 min

This digest was compiled by AI from multiple sources — links to the originals are below.

China's industrial PMI rose to 49.8 in August, with high-tech manufacturing at 52.9, while services PMI stayed at 49.3 and new service orders fell to 44.5. The country's trade surplus reached $1.2 trillion in 2025 and $687 billion in the first half of 2026. Germany's trade deficit with China hit €55 billion in H1 2026, prompting G20 discussions on new barriers.

Key Facts

China's official industrial PMI rose from 49.2 to 49.8 in August, with high-tech manufacturing PMI at 52.9.
China's trade surplus reached $1.2 trillion in 2025 and $687 billion in the first half of 2026.
Germany's trade deficit with China reached €89.3 billion in 2025 and €55 billion in the first half of 2026.
China's exports jumped 23.9% year-on-year in July, with high-tech exports up 40.7%.
US Treasury Secretary Scott Bessent said on August 30 that the world cannot have China with a $1.2 trillion trade surplus.

Two-Speed Economy

China's official industrial PMI rose from 49.2 to 49.8 in August, with production at 50.4 and new orders at 50.6. High-tech manufacturing PMI reached 52.9, and equipment manufacturing PMI reached 51.4. Services PMI remained at 49.3, with new service orders falling to 44.5 and construction at 46.9. Retail trade remains in contraction, and new housing financing rules in late August caused a nearly 5% daily drop in Chinese developer stocks.

Export Surge and AI

China's exports jumped 23.9% year-on-year in July, with high-tech exports up 40.7%. Semiconductor export value nearly doubled in the first half of the year. The global AI boom requires chips, electronics, servers, energy infrastructure, and data center components, and China is deepening its role in this chain.

Trade Imbalances and G20

Germany's trade deficit with China reached €89.3 billion in 2025 and €55 billion in the first half of 2026. German exports to China fell more than 12% to under €37 billion, while imports of Chinese goods rose nearly 9% to €91.8 billion. China was Germany's second-largest export market in 2021 but is now only ninth. US Treasury Secretary Scott Bessent said on August 30 that the world cannot have China with a $1.2 trillion trade surplus. Europe and the US want to discuss new barriers against Chinese exports at the G20 level.