China Export, Import Growth Hit Three-Month High in June

(Beijing) — China’s exports and imports posted stronger-than-expected growth in June, both rising at the fastest pace in three months, official data showed Thursday, reflecting a pickup in the global demand and resilient activity in the world’s second-largest economy.

Imports soared 17.2% last month from a year ago to $153.8 billion, according to figures from the General Administration of Customs. The figure reflects the biggest jump since March and exceeded the median forecast for a 13% gain in a Caixin survey of 11 economists. Overseas shipments rose by 11.3% year-on-year to $196.6 billion, the customs data showed, also the highest rate in three months and better than the median projection for growth of 8.8% in the Caixin survey.

For the first half of the year as a whole, exports rose by 8.5% by value, compared with a drop of 7.7% in the first half of 2016. Imports jumped by 18.9% in the first six months of 2017, reversing a 10.2% drop in the same period last year, partly reflecting a recovery in commodity prices but also an increase in demand from Chinese companies and consumers.

Huang Songping, a spokesman for the customs administration, attributed the strong trade performance in the first half of the year to improving foreign demand, stabilizing domestic economic momentum, and rising international commodity prices.

“If no major risks arise, … China’s foreign trade will likely continue the stabilizing and improving trend,” he told reporters at a briefing in Beijing.

But he also reeled off a string of uncertainties to the trade outlook for the second half of the year — possible interest rate hikes by the U.S. Federal Reserve, loose monetary conditions in Europe and Japan, growing trade protectionism, commodity price volatility, and policies by developed economies to attract manufacturing back home.

U.S. Tension

Shipments to the U.S. and the European Union picked up in the first half of the year from the January-through-May period, although growth in sales to Japan and the 10-member Association of Southeast Asian Nations slowed, customs data showed.

China’s trade surplus with the U.S. in the first half widened by 6.4% to $117.53 billion, which could exacerbate trade tensions between the two countries. Presidents Donald Trump and Xi Jinping agreed when they met in April to undertake 100 days of trade talks in an effort to boost U.S. exports of goods and services and narrow the country’s bulging trade deficit with China. The discussions are due to end on Sunday, and although some progress has been made — such as allowing American beef back into China — it’s unclear whether Beijing’s moves will be enough to placate the Trump administration.

There are also concerns on the domestic front that a cooling property market and the government’s campaign to deleverage the financial system to curb credit risks could hurt investment and dampen domestic demand. That would deal a blow to imports that could affect growth in resource-rich countries such as Russia and Australia.

The June trade data show China’s growth is “holding up,” said Vaninder Singh, a Singapore-based economist with NatWest Markets, the investment banking division of British bank RBS, in a note after the data release. But he cautioned that on a seasonally adjusted basis, imports fell 0.7% month-on-month in June after a 5.6% increase in May. Although some of the decrease could be attributed to companies’ running down their inventories, “the imports volume numbers will be worrying for commodity producers as we have seen another round of volume declines in June,” he said.

Investment bank China International Capital Corp pointed out that on a month-on-month basis in volume terms, imports of crude oil, soybean, and coal and lignite all fell, although iron ore edged up by 3.5%.

Even the year-on-year growth of imports could come under pressure as the country’s property market loses steam amid government measures to rein in surging housing prices, which will squeeze demand for products including steel and glass and in turn affect China’s purchases of commodities such as iron ore, some economists say.

“The cooling property market leads to slower domestic investment growth, which may weigh on import growth as well,” Zhao Yang, an analyst with Nomura International, said in a report.

Julian Evans-Pritchard, an analyst with research firm Capital Economics, said he is “skeptical that the current pace of imports can be sustained for much longer given the increasing headwinds to China’s economy from policy tightening.”

But exports are widely expected to remain strong, as demand from overseas markets, especially developed economies, continues to recover.

“The global economy is likely to continue growing steadily” in the second half of the year, the CICC economists wrote in a research note. “We expect China’s exports to continue to improve.”

Contact reporter Fran Wang (fangwang@caixin.com)