Rising exports signal China recovery

China’s economy has endured a tough year, with slowing growth in trade, investment and domestic demand, in addition to a cooling property sector and a stock market rout in recent weeks.
China’s economy has endured a tough year, with slowing growth in trade, investment and domestic demand, in addition to a cooling property sector and a stock market rout in recent weeks. PHOTO: EUROPEAN PRESSPHOTO AGENCY

BEIJING • China's exports rose for the first time in four months last month, providing fresh evidence that growth is stabilising ahead of gross domestic product (GDP) data this week.

Yet, hopes were offset by a realisation that China's trade sector had a poor second quarter, with volumes contracting significantly from a year ago, dragging on an already stuttering Chinese economy.

With China set to publish its second-quarter GDP data tomorrow, some analysts warned that lacklustre trade is the precursor for disappointing economic growth.

"The soft trade data in the second quarter suggests that China's second-quarter GDP will underperform," ANZ economists said in a note, adding that the figure could fall to 6.8 per cent from the first quarter's 7 per cent.

Overseas shipments rose 2.1 per cent from a year earlier in yuan value, the customs administration said yesterday, exceeding the median estimate in a Bloomberg survey for 1.2 per cent growth.

Imports dropped 6.7 per cent, narrowing from the fall of 18.1 per cent previously reported in May, leaving a trade surplus of 284.2 billion yuan (S$62 billion).

As monetary easing and fiscal stimulus stabilise demand, a stronger export sector may help prevent China's slowdown from deepening after a month-long stocks rout added to challenges.

"Exports are expected to maintain modest growth in coming months to help the economy," said Mr Liu Xuezhi, an economist with Bank of Communications in Shanghai. "Imports improved significantly in June because of lower import duties."

China's economy has had a difficult year. Slowing growth in trade, investment and domestic demand has been compounded by a cooling property sector. Worse, investor confidence was rattled in recent weeks by a stock market rout.

The customs office said yesterday the crisis in Greece was having "a certain effect" on trade, but also blamed weak external demand in general, rising labour costs and a stronger yuan for the weakness in exports. Some analysts warned that the pick-up in China's trade last month may not last.

"Even though inventories at domestic companies stayed at a relatively low level in May and June, the economic fundamental is weak," said Mr Nie Wen, an analyst at Hwabao Trust. "I doubt imports would continue to improve in the next few months."

In other signs that growth is stabilising, the nation's consumer price index increased 1.4 per cent last month from a year earlier, compared with the 1.2 per cent increase in May, data last week showed.

Growth in industrial output and credit accelerated in May, helping offset a further drop in the pace for fixed-asset investments.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on July 14, 2015, with the headline 'Rising exports signal China recovery'. Print Edition | Subscribe