China's economy on track as June trade surplus jumps


  • Business
  • Thursday, 10 Jul 2014

A man works on a dock at Lianyungang port in Lianyungang, east China's Jiangsu province. China's exports rose 7.2% in June, while imports rose 5.5%, with the trade surplus at US$31.6bil for the month - AFP Photo.


BEIJING: China's monthly trade surplus jumped 16.4% in June to US$31.6bil, official data showed Thursday, as exports and imports both rose in the latest sign of recovering strength in the world's second largest economy.

Exports increased 7.2% to US$186.8bil year-on-year, the General Administration of Customs announced, while imports gained 5.5% to US$155.2bil.

China is the world's biggest trading nation in goods.

The latest data came with worries over its growth outlook easing following a series of strong indicators in the second quarter, such as industrial production, retail sales and purchasing managers' index (PMI) surveys.

Gross domestic product (GDP) grew 7.4% in the first three months of 2014, weaker than the 7.7% in October-December last year and the worst since a similar 7.4% expansion in the third quarter of 2012.

Customs spokesman Zheng Yuesheng attributed the trade improvement in the second quarter to factors including supportive government policies and a wider global economic recovery.

"We expect the pace of growth in trade will be faster in the third quarter than in the second quarter," he told reporters.

"The stabilisation and recovery trend in trade will further consolidate."

China has since April introduced steps to boost growth, including tax breaks for small enterprises, targeted infrastructure outlays and incentives to encourage lending in rural areas and to small companies, measures dubbed "mini-stimulus" by economists.

"Improving trade figures, plus the encouraging PMI data, point out that China's growth will likely pick up somewhat in Q2 due to the targeted 'mini stimulus' measures," ANZ Bank economists Liu Li-Gang and Zhou Hao wrote in a report.

"We believe that China will achieve 7.5% growth in Q2."

China will announce its second quarter GDP results on July 16.

June's trade surplus fell short of the median forecast of US$36.9bil in a survey of 21 economists by The Wall Street Journal. Exports, which accelerated slightly from May's gain of 7%, fell well short of the median prediction of a 10% rise.

CAUSES FOR CONCERN

Imports, which fell 1.6% in May, rebounded to surpass the median forecast of a 5.4% increase.

Zheng, the Customs spokesman, stressed that "uncertainties" including rising Chinese labour and raw material costs and attempts by industrialised countries including the US to promote their own manufacturing sectors were causes for worry.

In the first quarter, the market share of seven types of Chinese labour-intensive goods such as textile products declined 0.6 percentage points in the US to 44.4% and 0.9 percentage point in the EU to 41.2%, he said, while competitors including Vietnam, Mexico and India saw their positions rise.

"It remains an arduous task to achieve the 7.5% target for full-year growth in trade," he said.

China's trade statistics this year have been erratic, with Beijing reporting an unexpected trade deficit of almost US$23bil in February, which authorities blamed on the Lunar New Year holiday season.

That was China's first monthly deficit in 11 months.

And in March, China's trade volumes fell dramatically in a development that analysts blamed on the continued impact of fake over-reporting of exports seen in early 2013.

For the first six months of this year, China's trade surplus declined 4.4% to US$102.86bil, as exports rose 0.9% to US$1.06tril and imports gained 1.5% to US$960bil, Customs said.

China's leaders say they want to transform the country's growth model to make consumer spending and other forms of private demand the key drivers of the economy.

The new model would steer it away from an over-reliance on huge and often wasteful investment projects that have underpinned decades of past expansion.

Such a makeover is expected to result in slower but more sustainable growth in the long run.

Julian Evans-Pritchard, China economist at Capital Economics, said that June's export growth failed to impress and both exports and imports were likely to slow in July.

"More broadly though, improving conditions in developed markets mean that we expect the export growth to remain healthy going forward, despite today's disappointing data," he wrote in an analysis.

"China is likely to continue to post large trade surpluses," he added. – AFP

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