China trade tops forecast on robust demand

Observers warn of headwinds though; need for materials abroad may already be slowing

BEIJING • China posted stronger- than-expected trade figures for last month yesterday, bolstered by firm global demand for Chinese goods and robust appetite for construction materials at home, but local curbs on lending could weigh on imports later this year.

Exports rose 11.3 per cent from a year earlier, as imports expanded 17.2 per cent, both beating analysts' expectations, official data showed.

While exports benefited from solid demand for electronics and industrial goods, a growing trade surplus, particularly with the United States, may add to trade tensions as US President Donald Trump seeks to boost activity in his country's manufacturing sector.

An increase in trade between China and North Korea in the first half of this year could also add to diplomatic pressures between Beijing and Washington.

Analysts say economic and political risks could undermine much of the strong trade momentum seen in the first half of this year.

"Looking ahead, we expect export growth to slow on uncertainties in external demand due to rising geopolitical risks and the stronger yuan-US dollar exchange rate in the first half of 2017," Nomura researchers said in a note.

  • 11.3 %

    Rise in China's exports from a year earlier, according to official data.


    The increase in imports.

China posted a trade surplus of US$42.77 billion (S$58.9 billion) last month, slightly above analyst forecasts for a surplus of US$42.44 billion and wider than May's US$40.81 billion.

Its demand for imports, particularly for industrial commodities used to feed a construction boom, has remained robust in recent months. This is mostly due to resilient real estate demand in smaller Chinese cities with lax property rules as the authorities are keen to clear a housing glut.

But analysts say a slowdown in demand for materials from abroad may already be taking place.

"Looking ahead, exports should continue to do well, given the relatively positive outlook for China's main trading partners," China economist at Capital Economics Julian Evans-Pritchard said in a note. "But we are sceptical that the current pace of imports can be sustained for much longer given the increasing headwinds to China's economy from policy tightening."

Exports denominated in yuan from January to last month rose 15 per cent from the same period a year earlier, while imports jumped 25.7 per cent during the period.

Many economists still expect Beijing's intensifying crackdown on unscrupulous lending and a cooling property market to translate to slower growth after a surprisingly solid first quarter.


A version of this article appeared in the print edition of The Straits Times on July 14, 2017, with the headline 'China trade tops forecast on robust demand'. Print Edition | Subscribe