China Exports Slump to Six-Month Low, Missing Forecasts. Hang Seng Index and AUD React

China’s Exports Slow as Front-Loading Ends

US tariffs affected China’s trade terms, as the effects of front-loading ahead of the tariffs, subsided.

Total exports rose 4.4% year-on-year in August, down sharply from July’s 7.2% surge, while imports increased 1.3% (July: 4.1%). Economists expected exports to rise 5% and imports to increase by 3%. Notably, exports increased at the slowest pace since January 2025.

August’s trade data aligned with recent Manufacturing PMI data that continued to highlight weak external demand. China’s RatingDog Manufacturing PMI increased from 49.5 in July to 50.5 in August. Despite rising above the neutral 50 level, new export orders declined for a fifth consecutive month. Weak demand for goods contrasted with stronger overseas demand for services, which lifted total new business to its fastest pace since May 2024.

August’s trade data may underscore the effects of higher US tariffs on China’s key trading partners in Southeast Asia. Vietnam signed a trade deal with the US, agreeing to a 40% tariff on transshipments. Tariffs on transshipments could impact demand for Chinese goods. Indonesian goods face a 19% levy on shipments to the US.

Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, previously warned of weak external demand, stating:

“Export growth might slow to 2-3% year on year in the third quarter of this year, and perhaps just 1% in the last quarter. Shipments of low-value goods, which can easily be manufactured elsewhere—such as furniture, clothes, shoes, and toys—to be most affected. Bicycles originally intended for export to America are already on sale at low prices on Chinese e-commerce sites.”

The Market Reaction to China’s Trade Data

Markets responded to the softer-than-expected trade data, with equities and forex markets reflecting shifting sentiment.

The Hang Seng Index briefly climbed to a post-trade report high of 25,545 before falling to a low of 25,435. On Monday, September 8, the Index was up 0.38% to 25,515 for the morning session.

Hopes of a US-China trade deal and further policy support limited the effect of China’s trade data on Hong Kong-listed stocks. However, Mainland China-listed stocks struggled in the morning session. The CSI 300 and the Shanghai Composite Index fell 0.26% and 0.09%, respectively.

In the forex market, the AUD/USD pair was more sensitive to the data, falling from $0.65674 to a post-report low of $0.65546 before recovering. On September 8, the AUD/USD was up 0.18% to $0.65624.

Australia has a trade-to-GDP ratio of over 50%, with China accounting for one-third of its exports. This exposes the Aussie dollar to key Chinese economic indicators and US-China trade headlines.

What’s Next? Beijing and Inflation in Focus

Traders should closely monitor key signals from Beijing. The Standing Committee of the National People’s Congress got underway on September 8, fueling hopes of fresh stimulus measures to bolster the Chinese economy.

On Wednesday, September 10, crucial consumer and producer price data will provide insights into the effects of weak external demand and rising competition on prices. Rising deflationary pressures could squeeze margins, potentially weighing on risk assets.

Discover strategies to navigate this week’s market trends here.