China's economy appeared to be picking up pace in July as exports rose by the most this year while some commodity imports hit record levels, raising hopes for a more sustained recovery. The economy is gradually emerging from a record contraction in the first quarter, but the recovery remains fragile as rising coronavirus cases around the world and renewed lockdowns could weigh on demand. Chinese consumer spending also remained subdued amid job losses and concerns about a resurgence of infections.
However, the country's export performance has not been hit as badly by the global slowdown as some analysts feared, while signs of stabilisation in the domestic economy have reduced the urgency for further stimulus.
Exports in July increased by 7,2% compared to the previous year, the fastest pace since December last year, customs data showed on Friday (07.08.2020), confounding analysts' expectations of a 0,2% drop and accelerating 0,5% rise in June.
Imports, on the other hand, fell by 1,4%., missing market expectations of a 1,0% increase.
«The data is in line with our forecast for exports to recover more decisively in H2 along with the global economy." said Tommy Wu, chief economist at Oxford Economics, in a note, adding that external demand for other products besides medical supplies will gradually recover as global industrial production begins to pick up.
«However, the path ahead may be uneven as new export orders remain weak and the recovery path will be uneven across economies.«.
Exports of textile products from January to July, including face masks, rose 31,3% year-on-year, accelerating from a 27,8% expansion in the first half. Sales growth of medical equipment also picked up to 47.3% from 41.4%.
But in a sign that Global demand may be stabilising, exports of other goods such as electronics and mobile phones increased while declines in furniture and toys moderated, the data showed.
Immersion in imports
Analysts They attributed the year-on-year drop in imports in July to commodity prices weaker and the recovery of investment after strong shipments in the previous year.
They are optimistic that a surge in infrastructure projects backed by policy support will lift import growth. Imports rose 4.9% in July on a monthly basis.
«With credit growth accelerating, China's stimulus-driven recovery looks set to continue in the coming months, supporting a further rebound in imports," said Martin Rasmussen, China economist, at Capital Economics.
Import volumes of industrial raw materials remained solid, with record imports of iron ore and copper, along with a sharp jump in crude oil.
The country's trade surplus for July was $62.33 billion, up from a surplus of $46.42 billion in June.
One risk to China's trade outlook this year is rising US-China tensions, which are expected to escalate ahead of the US presidential election.
The country's trade surplus with the United States widened to $32.46 billion in July from $29.41 billion in June.
China's imports from the United States in July rose 3,6% compared to the previous year, slowing from an 11,3% increase in June. In January-July, imports fell by 3,5%, below the commitments made in the Phase 1 trade deal to increase purchases of U.S. goods.
Senior US and Chinese officials to review implementation of Phase 1 trade deal and will likely air mutual complaints during a video conference on August 15.
Source: Reuters
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