China Viewpoint: Mid-year outlook: Exports carry growth as rebalancing stalls

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China Viewpoint: Mid-year outlook: Exports carry growth as rebalancing stalls

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China Viewpoint

Mid-year outlook: Exports carry growth as

rebalancing stalls

Domestic demand remains in the back seat 25 June 2026

After China’s trade surplus reached a record US$1.2tn in 2025, we had expected more GEM Economics

progress on rebalancing in 2026. Against the backdrop of a sharp deceleration in fixed Asia | China

asset investment (FAI) since last June, the 1Q26 policy-driven rebound in investment Helen Qiao

was a welcome development. However, the pickup in FAI growth and the improvement in China & Asia Economist

domestic demand’s contribution to GDP turned out to be short-lived. April-May data for Merrill+852 3508Lynch3961(Hong Kong)

both FAI and retail sales fell well short of expectations and prior readings, reviving helen.qiao@bofa.com

concerns over growth stability and the rebalancing agenda. Benson Wu, CFA

China & Korea Economist

Growth still leaning on exports, not policy stimulus Merrill+852 3508Lynch5047(Hong Kong)

benson.wu@bofa.com

Despite weak domestic demand, policymakers appear comfortable with headline growth,

suggesting limited near-term appetite for additional easing. Encouragingly, export

growth has remained robust. While elevated energy prices raised concerns over global Abbreviations:

trade and RMB appreciation may weigh on competitiveness, these risks either subsided

recently or have yet to materialize meaningfully. We upgrade our 2026 export growth EV: Electric vehicle

forecast to 15.0%, supported by AI-related capex and strong global demand for

RRR: Required reserve ratiorenewable energy equipment and EVs.

PSL: Pledged supplementary lending

Growth forecasts unchanged; rebalancing downgraded facility