China August exports beat forecasts, imports in surprise fall

BEIJING : China's exports rose more than forecast in August while imports unexpectedly fell, pushing the trade surplus to a record high for the second consecutive month and underlining the challenges facing policymakers as they struggle to revive tepid domestic demand.

Exports rose 9.4 per cent in August, the General Administration of Customs said on Monday, beating a forecast rise of 8 per cent but slower than July's 14.5 per cent growth rate.

But imports fell 2.4 per cent in terms of value, missing a Reuters estimate for a 1.7 per cent rise. That led to an all-time high trade surplus of $49.8 billion, exceeding forecasts for a surplus of $40 billion.

It was the second straight month that China's import growth has been unexpectedly weak, raising concerns that sluggish domestic demand exacerbated by a cooling housing market is increasingly dragging on growth in the world's second-biggest economy.

"The deepening contraction in the import data indicated weak domestic demand," said Li Huiyong, an economist at Shenyin Wanguo in Shanghai.

"The trade data indicated downward pressure on China's economy. Policymakers may need to enhance their efforts to support the domestic economy if industrial output growth slows to 8.6 per cent in coming months."

China's economy has had a bumpy ride this year. Growth slowed to an 18-month low of 7.4 per cent in the first quarter and rebounded only slightly to 7.5 per cent between April and June after a flurry of government stimulus measures.

Yet hopes that the recovery may gain traction were quickly dashed in July when data showed the economy was losing momentum once more.

China's export sector was surprisingly buoyant in July when growth jumped to a 15-month high, pushing the trade surplus to a record $47.3 billion. The upbeat performance was helped in part by a strengthening US economy, China's top export destination.

But risks posed by the cooling property sector have dimmed any optimism brought on by perkier foreign demand. Accounting for about 15 per cent of China's economic output, the real estate market is experiencing its worst downturn in two years as sales and prices turned south.

The housing slump, combined with a startling drop in credit supply last month to a six-year low, has led many analysts to predict that China's leaders need to loosen policy further and offer further stimulus in order to meet this year's economic growth target of around 7.5 per cent.

To stoke activity, China started loosening policy in modest steps from April. Some construction projects were brought forward, the amount of deposits that banks must set aside as reserves was lowered for some lenders, and property controls were relaxed to boost the housing market.

Source : economictimes.indiatimes.com