MNI BRIEF: China’s Surplus Driven By Weak Demand -ECB Bulletin

China's weak domestic demand rather than U.S.-China trade tensions is the key factor for the strong rise of exports to Europe and the stagnation of imports, the European Central Bank published in its latest Economic Bulletin on Tuesday.

China’s real estate downturn and policies promoting self-reliance under “Made in China 2025” have eroded household demand and curbed imports, particularly of consumer and intermediate goods, with weak domestic sales and falling export prices prompting firms to seek foreign markets — notably in sectors such as motor vehicles and steel, where exports have grown by about 75% since 2022, the ECB said. (see MNI PODCAST: ECB Economist Sees Potential For China Goods Flow )

““China’s import elasticity with respect to domestic demand has fallen below one for the first time in decades, suggesting that structural factors are at play.” ECB staff note in the bulletin, signaling a potential lasting change in trade patterns.