Property sector’s downturn has pushed imports to their 11th month of declines in the past year
4 min
HONG KONG—China’s exports to the rest of the world dropped for a fourth straight month in August, bringing little relief to the country from a deepening economic malaise and weighing on the global trade outlook.
China has struggled to sustain a wave of overseas demand for Chinese-made goods that carried it through much of the three years of the pandemic, particularly as Western consumers tilted their spending back toward services and away from smartphones, furniture and other goods. Higher borrowing rates in the U.S. and other developed countries also hit consumer appetite.
Meanwhile, Chinese imports continued to shrink in August, a reflection of lacklustre consumer demand even after the country loosened its longstanding Covid-related restrictions. A downturn in China’s property market has also sapped demand for raw materials used in construction.
Taken together, the sluggish trade data released Thursday by Beijing provides new evidence that the world’s second-largest economy is struggling to revive domestic demand.
That would ripple through the global economy as China’s slowdown weighs on oil prices and hurts commodity-exporting countries such as Australia, Brazil and Canada. Chinese manufacturers have been under pressure to cut prices to retain market share, potentially sending disinflationary currents around the world.
While Chinese policy makers have trimmed key interest rates and made new attempts to revive home-buying sentiment, economists have widely dismissed these efforts as too piecemeal to revive growth given the speed with which sentiment has soured.
“There’s still a steep hill to climb to get the all-clear on stabilisation for China,” said Frederic Neumann, chief Asia economist at HSBC.
China’s outbound shipments declined 8.8% in August from a year earlier, China’s General Administration of Customs said Thursday. The reading narrowed from the 14.5% year-over-year drop in exports in July, which marked the worst such result since February 2020.
Imports to China, including intermediate components, commodities and consumer products, fell 7.3% in August from a year earlier, slower than July’s 12.4% drop.
Even with the better-than-feared trade data, economists generally agree that exports’ ability to provide support for China’s sputtering recovery remains a distant prospect, particularly given that global trade is expected to contract this year.
“We expect exports to decline over the coming months before bottoming out toward the end of the year,” research firm Capital Economics told clients in a note Thursday.
Apart from the general slowdown in trade, China is facing a raft of other economic headwinds. After a brief spurt of spending in traveling and dining out upon reopening early this year, consumers tightened their purse strings, dragging consumer prices into deflationary territory in July. China is set to report August inflation data on Saturday.
Factory activity, meantime, reported a fifth straight month of contraction in August, while a years long downturn in the housing market has only deepened in recent months. Private investment remains depressed, while the youth jobless rate climbed to a series of record highs in the summer before Beijing decided to discontinue releasing the data to the public.
More broadly, the run of downbeat data during the summer months has sparked growing concerns over China’s long-term growth trajectory and prompted several investment banks to trim their growth forecasts for gross domestic product to below 5% for the year, compared with the official government target of around 5%, which was set in March.
Meeting with Southeast Asian leaders this week, Chinese Premier Li Qiang struck back against widespread pessimism about the country’s near-term economic outlook, saying the country is on track to hit its growth target for the year.
While Chinese policy makers have rolled out a batch of stimulus measures in recent weeks, including trimming interest rates for businesses and home buyers and extending tax relief to households, many economists have questioned whether the policies will be enough to turn around weak consumer sentiment.
China’s reduced appetite for imports—which have fallen for 11 of the past 12 months—reflects in large part the knock-on effects of the country’s continuing property crisis. Both property investment and new construction starts have plunged in recent months amid a loss of confidence in home prices; that in turn has curbed China’s appetite for commodities such as iron ore.
The export data, meanwhile, offers more evidence of China’s shifting trade patterns.
As ties have soured between Beijing and Washington, many U.S. companies have begun to redirect supply chains away from China and toward other Asian countries such as India, leading to a sharp decline in America’s reliance on goods from China.
Rising operational uncertainty, made most clear during China’s pandemic-era lockdowns, which disrupted domestic and global production and logistics, heightened the urgency for many multinationals.
In the first half of the year, China accounted for 13.3% of U.S. goods imports, down from a high of 21.6% in 2017 and representing the lowest level since 2003.
Meanwhile, trade with the 10-member Association of Southeast Asian Nations has grown over the past year to become China’s largest export market, ahead of the U.S. and European Union, according to a recent report by HSBC.
China’s warmer trade relations with Asian countries will help buffer the impact of softening Chinese exports to advanced economies. But economists say Beijing won’t be immune if the U.S. and other advanced economies tip into recession.
Global goods trade is expected to drop by 1.5% this year in part due to tightening global monetary and credit conditions before staging a modest recovery of 2.3% growth in 2024, according to estimates by Adam Slater, lead economist at Oxford Economics.
China’s weakening trade activities, meanwhile, is likely to ripple across Asia, slowing industrial expansion and hitting commodity prices, he added.
—Xiao Xiao in Beijing contributed to this article.
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Strong family financial planning can help reduce taxes and support younger generations. From intrafamily loans and asset gifts to inheritance disclaimers, strategic cooperation can create meaningful financial benefits—when families have the trust and structure to make it work.
4 min
Happy is the family whose members—parents, grandparents and grown children—trust each other enough to cooperate on shared goals, especially financial ones. When that is truly the case, Uncle Sam’s tax rules can help as well.
This matters especially now that mortgage rates are above 7%, and many families are looking for ways to help younger members. If the elders have resources and are confident younger ones can cooperate, a family loan could make homeownership possible while providing the elders with a useful income stream.
Other strategies can actually lower taxes, such as when funding 529 plans or Roth IRAs, or when someone inherits a traditional IRA with required withdrawals larger than they will need.
Here are three strategies useful for functional families.
It is perfectly legal for families to lend money to a relative for a down payment or even a private mortgage.
But it is important not to cut corners, says Ryan McKeown, a CPA with Modern Wealth Enhancement in Minnesota. If the loan is for a down payment, be honest with the mortgage provider and have a formal agreement. The lender owes tax on the interest payments received.
If the loan is for a private mortgage, both sides should have legal representation with a formal written agreement, including payment terms. The lender owes tax on the interest, and the borrower often can deduct it if he or she itemizes.
To avoid IRS trouble, the interest rate shouldn’t be lower than the agency’s Applicable Federal Rate at the time of the loan. Currently that is about 5% for loans longer than nine years; about 4.5% for loans three to nine years; and about 4% for loans three years or less. Currently, traditional mortgage rates are generally above 7%.
In addition, the lender could use the $19,000 annual gift-tax exemption (described below) to forgive some or all of the interest or principal annually. If both lenders and borrowers are married, that is up to $76,000 a year. There is no tax for the borrower on such forgiveness, because it is from a gift.
If you’re going this route, McKeown advises against having a fixed plan to forgive the debt. Instead, do it in one-off letters specifying the amount—and keep careful records. Otherwise the IRS might try to treat the loan as a taxable gift.
Powerful tax-saving moves for families often use gift-tax provisions. Under current law, anyone can give anyone else up to $19,000 of assets annually, free of gift tax. That means a married couple with three grandchildren could give them a total of $114,000 in 2026.
The gifts can be cash or other assets, like stock. For noncash gifts, the cost basis—which is the starting point for measuring taxable gain after a sale—“carries over” to the recipient. So if someone buys $1,000 of stock and gives it away when it is worth $5,000, the recipient’s cost basis is $1,000. If the recipient later sells the shares for $8,000, the taxable gain is $7,000.
Here’s an example showing how gifts could save a family taxes. Grandma is a widow of modest means, while her child and spouse have prospered. The couple has two children, and they want to contribute $5,000 to a 529 college-savings plan for each—but they need to sell stock to do it. Their tax rate on the sale would be 18.8%, and they would need to sell about $11,000 of stock.
However, Grandma’s federal tax rate on the stock sale is 0%. If the couple gives $10,000 of shares to Grandma, she could sell them, pay no tax, and fund the grandchildren’s 529 plans. This saves about $1,000 of tax.
These moves are legal, and they could be used in other ways, such as to help a young person fund a Roth IRA.
But trust among family members is essential: Under the law, givers can’t put conditions on a gift. Grandma could use her stock proceeds to take a cruise, but she makes 529 contributions instead.
Mark Sellner, a retired tax attorney and CPA living in Sarasota, Fla., uses this strategy. His children sell stock he gives them and fund 529 plans for his grandchildren.
The family’s tax savings aren’t huge, but he likes other benefits. The sales by his children don’t boost his adjusted gross income, which in turn could raise his Medicare Irmaa premiums or his 3.8% surtax on net investment income.
Sellner doesn’t worry about his children using the funds for another purpose.
“There can’t be any strings attached to gifts. Of course, it is up to us to decide whether to make them in the future,” he says.
Two caveats: The “kiddie tax” applies to most children under age 24, and it is levied at the parents’ rate on investment income above $2,700 in 2026. Consider this before making gifts to a young person.
Investors who give away stock also forgo the step-up, an important provision that exempts assets held at death from capital-gains tax.
Sellner knows he’s losing a step-up, but says, “The children could use a little more now. Why should they wait 20 years to get it?”
A disclaimer is a highly useful strategy in which one heir renounces an inheritance in favor of another heir. Assuming family members cooperate, this can save taxes.
Here’s one example. Dad died and had a large traditional IRA that he left to Mom. She has enough assets and income to cover her expenses, and she lives in a state with a stiff estate tax. The inherited IRA would put her estate over the threshold.
Also surviving are three young-adult children. If Mom disclaims all or part of Dad’s IRA within nine months of his death, that amount could go directly to the children. They will have 10 years to empty the account, and the family as a whole will likely save estate and income taxes.
Disclaimers have many key details, especially regarding beneficiary documents. Although heirs have great freedom in choosing what assets to disclaim, the rules about who gets disclaimed property are rigid. It is best if the original owner names tiers of heirs so that if one disclaims, the next recipient is clear.
