China trade data beats forecasts, but imports shrink again in June

China's exports picked up unexpectedly in June but imports tumbled again, reinforcing expectations that the government may further loosen policy to lift the Chinese economy after a recent stock market rout.

However, imports slid much less than analysts had forecast, leading some to see a silver lining in the latest data.

China's June exports exceeded analyst expectations, rising 2.8% from a year earlier, while imports fell by 6.1%.

That left the country with a trade surplus of $46.54 billion for the month, the General Administration of Customs said on Monday.

Analysts polled by Reuters had expected exports to fall by 0.2%, and predicted imports would fall by 15.0%.

China Customs said that the crisis in Greece was having "a certain effect" on trade, but also blamed weak external demand in general, rising labour costs and a stronger yuan for the weakness in exports.

It said enduring industrial overcapacity continued to dampen import demand.

Persistent weakness in Chinese imports, which have fallen eight straight months, suggests that domestic consumption remained tepid even though the central bank has repeatedly loosened monetary policy in the past seven months to stoke activity.

"There was quite a recovery in import growth and it looks like there's more going on than FX rate differences," said Julian Evans-Pritchard of Capital Economics in Singapore.

"It suggests there was an improvement in domestic demand probably due to previous policy easing."

A survey of factories earlier this month showed that China's manufacturing sector grew slightly in June, though not as much as expected.

To boost the economy, China's central bank on June 27 cut lending rates for the fourth time since November and trimmed the amount of cash that some banks must hold as reserves, stepping up efforts to support an economy that is headed for its poorest performance in a quarter century.

But a tumble in Chinese shares in recent weeks that knocked nearly one-third of the value off key benchmark stock indices has rattled confidence, and raised worries about potential knock-on effects on the Chinese economy.

The government is due to release second-quarter gross domestic product data on Wednesday and many economists expect annual growth to have dipped below 7%, the weakest performance since the global financial crisis.

Source : business-standard.com