Export Surge Bolsters Chinese Bond Yields, Revealing Growth Disparity Between External and Domestic Sectors

Beijing | EcoPulse24

Chinese 10-year government bond yields improved, rising to around 1.86% after hitting a two-week low, as strong trade data boosted confidence in the country’s economic outlook despite persistent domestic weakness. The recovery was mainly driven by foreign trade, which offset slower local consumption.

In detail, China’s exports in December increased by 6.6% year-on-year to a record $357.8 billion, exceeding market expectations of 3.0% and accelerating from 5.9% growth in November. Imports also rose 5.7%, marking the fastest pace for both indicators since September. Over 2025, exports grew 5.5% to $3.77 trillion, with the trade surplus reaching a record $1.2 trillion, confirming exports as the main growth driver.

Geographically, external momentum was notable: exports to ASEAN jumped 11.1%, the EU 11.6%, Latin America 9.8%, Africa 21.8%, Japan 5.3%, Taiwan 11.2%, and Australia 12.9%. In contrast, shipments to the US fell 30% in December after a 28.6% drop in November and declined 20% annually in 2025, affected by new US tariffs despite some tariff reductions.

This strong external performance helped offset ongoing domestic pressures from a prolonged property market slump and weak investment, leaving the economy more dependent on global demand. Looking ahead, external demand and export competitiveness are expected to support growth through 2026 as long as the trade truce with the US holds, though risks remain from potential new US tariffs on countries trading with Iran.

Analysis
The data paints a dual picture for China’s economy: clear external strength contrasted with ongoing domestic fragility. Improved bond yields reflect confidence conditioned on sustained global demand, but also highlight growth’s reliance on exports over local drivers. Future trends hinge on global trade policy developments and Beijing’s ability to revive domestic demand without undermining export momentum.