India's foreign trade is in the doldrums with negative growth and huge trade deficit while
China trade shows signs of recovery
Last updated: August 8, 2013 7:28 pm
By Simon Rabinovitch in Shanghai
China’s exports and imports grew strongly in July, boosting confidence that the economy may be stabilising after a shaky first half of the year.
Exports rose 5.1 per cent year on year, rebounding from a 3.1 per cent drop in June. Imports increased 10.9 per cent year on year, up from a 0.7 per cent fall in June.
Both figures were well ahead of forecasts, pointing to a steadying of the country’s growth outlook after a sharp slowdown in exports and imports over the previous few months. The big jump in imports was especially notable as it is an indication that the Chinese economy is holding up well.
“Stronger domestic investment demand has clearly contributed to the rebound in July imports, as reflected by more strength in import volume of investment goods and raw materials,” said Wang Tao, an economist with UBS.
In recent weeks the Chinese government has stepped up support for the economy with a series of small, targeted measures, including the temporary cancellation of taxes for small businesses. Concerned about the deterioration of exports, Beijing in July said it would also cancel some customs inspection fees and simplify approval procedures.
Liu Ligang, an economist at ANZ, said China was also beginning to catch a tailwind from overseas. “Improving consumer confidence in the US and Europe may help,” he said.
There have been incremental signs that the eurozone could exit its longest recession on record in the second half of this year.
Chinese imports from Germany, China’s largest EU trading partner rose 8.6 per cent year on year in June, while exports to Germany fell 0.9 per cent.
But in a sign that any recovery is still fragile, there were mixed signals from Germany where total exports rose by a modest 0.6 per cent in June, compared with the previous month, while total imports dropped 0.8 per cent over the same period.
The import data were particularly disappointing as many struggling eurozone economies depend on demand from Germany, Europe’s biggest economy.
German industrial companies have generally remained rather gloomy about the coming months. Lanxess, a German speciality chemical maker, warned this week that “the fragile sentiment in Europe is now evident in other markets that are important for us, such as China and Brazil.”
At the same time as unveiling a series of small measures to prop up growth, the government has rebuffed calls for a more aggressive stimulus. It has also surprised observers by continuing to let the renminbi climb higher against the US dollar, with it posting successive all-time highs this week. The strong currency makes it tougher for exporters to compete with other countries, but the government hopes it will also nudge them into more valuable, innovative lines of business.
This currency policy is reflective of what many analysts and investors see as the government’s commitment to push through difficult reforms even if it means inflicting some short-term pain on the economy.
But Shuang Ding, an economist with Citi, reckoned that Beijing would soon halt the currency’s climb as the focus shifts to doing more to support growth. “We see limited room for further appreciation,” he said.
Growth in China slowed to 7.5 per cent in the second quarter and many analysts believe the economy is on track for a deeper slowdown this quarter.
China will report a large set of economic indicators on Friday, from inflation to investment, which will give a much more detailed picture of how the economy performed in July.
Signals have so far been mixed. The official purchasing managers’ index clung to expansionary territory, a better performance than had been forecast. But a similar survey by HSBC fell to its lowest in 11 months.
After holding money back from the financial system in June and triggering a cash crunch, the central bank has provided more support with injections of short-term liquidity. That support, plus the belief that the economy could be stabilising, has helped the stock market. The Shanghai Composite, the country’s main stock index, fell about 15 per cent in the first half of the year, making it one of the world’s worst performers, but it has since rebounded 5 per cent.
China trade shows signs of recovery - FT.com