China’s economy showed tentative signs of stabilization in June. Factory activity appeared to regain some ground. Retail sales recovered from recent weakness. Yet the improvement hinged heavily on external factors.
Independent surveys pointed to a pickup in manufacturing and consumer spending last month. The China Beige Book, which polled more than 1,300 businesses in early June, reported that manufacturing saw the clearest gains. Retail sales recovered nicely too. A surge in luxury goods sales stood out. Tourism-related spending lagged behind.
The second quarter ended on a more positive note than it began. This performance will need to repeat itself in July and August. Only then might analysts speak of genuine momentum. So said the Beige Book report released on June 29.
Official data for June remains days away. Beijing plans to release trade figures on July 14. Industrial production, retail sales and second-quarter GDP follow the next day. The first official clue arrives Tuesday. Economists polled by Reuters expect the National Bureau of Statistics manufacturing purchasing managers’ index to print at 50.1. That would mark a return to expansion after May’s flat 50.0 reading.
May brought mixed signals. China’s exports jumped 19.4% from a year earlier. The gain beat forecasts of 15% and accelerated from April’s 14.1% rise. Imports climbed 27.4%, ahead of expectations. The trade surplus widened to $105.43 billion. Reuters detailed how shipments of cars, tech products and semiconductors powered the surge.
Exports to the United States soared 35.4% in May. That compared with much weaker performance throughout 2025 when higher tariffs bit hard. Shipments to Southeast Asia rose 24.3%. Growth to Europe held at 7.6%. These regional breakdowns underscored a partial recovery in key markets.
Strong demand for artificial-intelligence components played a major role. Integrated circuit exports jumped more than 100%. High-tech shipments overall gained over 50%. Analysts tied the trend to global AI investment. “The AI story is far from over,” said Xing Zhaopeng, chief Asia economist at ANZ, in the Reuters report. Chips, he added, are rewriting China’s trade landscape.
Green-energy exports to the U.S. also accelerated sharply. Unassembled photovoltaic cells surged 346% year-on-year in value. Lithium-ion battery shipments rose 20.8%. Lead-acid batteries posted even steeper gains. These increases reflected both AI-driven power needs in American data centers and energy-security worries after tensions around the Strait of Hormuz. South China Morning Post reported the figures on June 22, quoting analyst Xinyi Shen on short-term inventory rebuilding combined with lasting demand.
But domestic weaknesses persist. Retail sales fell in May for the first time since the pandemic. The 618 shopping festival delivered disappointing growth. Manufacturing investment turned negative on a year-to-date basis in May. Declines in metals, chemicals and autos dragged the figures lower, according to data provider Wind Information.
Tariff dynamics added another layer. President Trump’s meeting with Xi Jinping suggested duties would stay relatively contained for now. A 10% levy on goods from many trading partners under Section 122 expires July 24. Additional measures from Section 301 reviews have not yet materialized. Chinese firms rushed shipments to the U.S. ahead of any potential changes. Freight rates between Asia and America hit their highest level in nearly two years. CNBC attributed the spike to front-loading by American importers.
Tianchen Xu, senior economist at the Economist Intelligence Unit, captured the mood. “China’s weak momentum likely turned around in June,” he told CNBC. The improvement remained first and foremost led by the external sector. Strong AI demand and lower oil prices after easing Iran-related tensions would help cushion broader pressures.
Goldman Sachs adjusted its forecasts upward. The bank now sees third-quarter GDP growth at 5% quarter-on-quarter annualized. That revises an earlier 4.5% call. Faster fiscal spending and cheaper energy factored into the change. For the second quarter Goldman still expects a softer 3.5%.
Export orders to Asia and developing countries slowed in June from May levels. Orders to Europe held steady. The pattern suggested the U.S.-led rebound may not extend evenly. Businesses continued to grapple with weak domestic consumption. Calls for Beijing to stimulate household spending have grown louder.
Longer-term questions loom. China’s trade surplus topped $1 trillion in 2025. That scale has drawn scrutiny from trading partners concerned about overcapacity. Yet the May and June data show how quickly external demand can shift the narrative. AI spending in the West provides one buffer. A temporary lull in tariff escalation supplies another.
Investors and policymakers will watch the upcoming releases closely. A sustained expansion above 50 in the PMI could reinforce optimism. Repeated weakness in retail or investment would revive worries about structural imbalances. The external sector has bought time. Whether that time translates into durable recovery depends on what happens next inside China.
And the clock is ticking. July and August must deliver if the late-June pickup is to mean more than a seasonal blip. For now the data points to a fragile stabilization. External tailwinds from technology demand and geopolitics have helped. Domestic engines still need attention.
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