For centuries, China has been described through the prism of its great economic transformations. From the imperial trade networks that once connected the East to the world, to the industrial revolution that reshaped the global economy, economic power has rarely moved in a straight line. It tends to shift from one engine of growth to another, often creating contradictions that are difficult to capture through a single headline. China today is presenting precisely such a contradiction. The country's economy is slowing, domestic demand is weakening and investment is contracting sharply. At the same time, factories are running, electricity consumption is rising, technology industries are expanding and China continues to import enormous volumes of raw materials. The result is an increasingly polarised economic picture – one in which the traditional indicators of growth are weakening, while the physical flows of commodities remain remarkably resilient. In fact, China’s GDP growth slowed to 4.3 percent year-on-year in the second quarter, down from 5.0 percent in the first quarter and the weakest quarterly expansion since late 2022, excluding the pandemic period. The figure also fell below Beijing’s 4.5-5.0 percent full-year growth target range. More importantly, the underlying data pointed to a clear deterioration in domestic activity. Retail sales increased by just 1.0 percent year-onyear in June, while fixed-asset investment declined 5.7 percent yearon-year during the first half of the year, deteriorating from the 4.1 percent contraction recorded through May. Real estate investment fell by 18 percent, highlighting the continued depth of the property downturn. Yet the picture changes considerably when looking at the industrial economy. Industrial production increased 5.3 percent yearon-year in June, while electricity consumption rose 5.3 percent during the first half of the year. Power demand from high-tech and equipment manufacturing increased 10.3 percent in June, with the country repeatedly recording new electricity-load highs during the recent heatwave. The figures underline the resilience of China’s manufacturing and technology-related sectors, particularly those linked to artificial intelligence, electric vehicles, advanced equipment and digital infrastructure. Exports have become another important source of support. Chinese exports surged 27 percent year-on-year in June, driven by strong demand for semiconductors, computers, power equipment and other technology-related products. This strength is increasingly compensating for the weakness of the domestic economy, but it is also creating a growing imbalance. Beijing is now attempting to address this structural imbalance. The authorities have unveiled the country’s first dedicated five-year plan focused exclusively on expanding consumption, targeting retail sales of approximately 60 trillion yuan by 2030. The plan aims to raise household incomes, strengthen social security, reduce precautionary savings and encourage spending on services such as healthcare, education, elderly care, tourism and leisure. The direction is significant. China’s manufacturing sector has developed far faster than domestic consumption, and policymakers increasingly recognise that a more balanced economic model is required. The problem is that changing the behaviour of households is considerably more difficult than stimulating investment or exports. The prolonged property crisis continues to weigh on confidence, while weak employment and income expectations encourage households to save rather than spend. As a result, the consumption push is likely to be a long-term structural project rather than an immediate solution to the current slowdown. In the meantime, China’s industrial transformation is continuing. Artificial intelligence has become a strategic priority, with Beijing seeking to establish China as a global leader in the sector and increasingly promoting its own models and open-source technologies internationally. The rapid expansion of AI infrastructure is supporting demand for semiconductors, computing equipment and electricity, while helping to maintain industrial production and exports at a time when traditional sectors, particularly property, remain under pressure.
This is where the economic story becomes particularly relevant for dry bulk. While the composition of Chinese growth is changing, the country's appetite for raw materials remains substantial. The strength of the industrial economy is still translating into significant seaborne commodity flows, with iron ore providing a clear example. China imported 112.69 million tonnes in June, up 15 percent monthon-month and 6.4 percent year-on-year, marking the highest monthly volume in six months. First-half imports reached 628.87 million tonnes, an increase of 6.3 percent year-on-year. Shipments from major exporters increased, while lower prices encouraged additional buying by steel mills and traders. The steel market, however, continues to reveal the same underlying contradiction. Domestic construction demand remains under pressure, but Chinese steel exports remain elevated as producers benefit from competitive prices. June steel exports reached 10.32 million tonnes, 6.6 percent higher than a year earlier, although first-half exports were down 5.6 percent year-on-year.
The coal market delivered an even stronger signal. China imported 42.78 million tonnes of coal in June, up 29.5 percent year-on-year, while first-half imports increased 1.7 percent to 225.4 million tonnes. Domestic production was affected by increased safety inspections following a major mining accident, while seasonal electricity demand strengthened as temperatures rose. The coking coal market was particularly supportive, with Chinese buyers turning to alternative suppliers, including Australia and Canada. Australian coking coal shipments to China are estimated to have reached a multi-year high. Thermal coal demand also benefited from the summer power season. China’s electricity consumption rose 5.3 percent year-onyear in the first half of the year, with the country recording repeated new electricity-load records. The combination of constrained domestic production, seasonal power demand and stronger coking coal requirements has therefore created a supportive environment for imported coal.
The agricultural trade has been equally impressive. China’s soybean imports reached a record 13.55 million tonnes in June, up 10.5 percent year-on-year and 14.9 percent month-on-month. First-half imports totalled 50.15 million tonnes. Brazil was the main beneficiary, supported by a large crop and competitive prices. The United States, however, is gradually regaining market share, with China importing 8.38 million tonnes of US soybeans between January and May and expected to increase purchases of the new US crop. The combination of record Chinese soybean imports and strong Brazilian availability is particularly supportive for tonne-mile demand. As Brazil and the United States compete for access to the world’s largest soybean market, the timing of shipments and the relative competitiveness of the two origins will become increasingly important during the second half of the year.
China’s economic transformation is therefore unlikely to be defined by a simple acceleration or deceleration. Rather, it is a transition between engines of growth, with the old one – property and investment – losing momentum before the new ones have fully assumed its weight. For the dry bulk market, this creates both uncertainty and opportunity. The headline numbers may suggest a slower China, but the cargoes tell a more nuanced story: iron ore continues to flow, coal imports are accelerating and agricultural trade is stretching across increasingly competitive and distant supply chains. As the structure of Chinese growth evolves, so too will the geography, composition and intensity of its commodity demand. In the end, the question is not whether China is slowing down. It is what kind of China is emerging – and how much cargo that new China will require.
Data source: Doric