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 While manufacturing appears to have picked up in the world's
second-largest economy, unexpected weakness in the services sector
this week has renewed concerns about the growth outlook. The weak
housing market remains China's biggest risk, posing a drag on the
broader economy and investor confidence.
Recovering global demand may not be enough to bolster a weak
internal economy weighed by a cooling property sector and Beijing's
anti-corruption drive, suggesting policy support will likely
continue to keep economic growth on track, analysts say.
Exports in July jumped 14.5 percent from a year earlier - the
fastest pace in 15 months, the General Administration of Customs
said on Friday, doubling from 7.2 percent in June and roundly
beating market expectations. Exports were stronger than expected
even after pricing in inflated export data in early 2013, when firms
falsified invoices to skirt capital curbs.
Some analysts attributed the export spurt to delayed shipments
caused by recent volatility in the yuan which may not sustain.
Meanwhile, imports fell 1.6 percent versus a rise of 5.5 percent in
June, leaving the country with a record trade surplus of $47.3
billion for the month.
"The (export) data indicates very strong demand externally and less
need for a weak currency," said Dariusz Kowalczyk, senior economist
at Credit Agricole CIB in Hong Kong.
"However, imports contracted 1.6 percent year-on-year, indicating
soft domestic demand and a downward pressure on growth. Policymakers
are likely to do more to support the domestic economy."
A Reuters poll had predicted a 7.5 percent rise in exports, a 3
percent increase in imports and a trade surplus of $27 billion.
Financial markets firmed on the data with the Shanghai Composite
Index rebounding. It rose 0.25 percent by midday from its intraday
low, when it was down 0.32 percent.
STRONG EXPORTS, WEAK IMPORTS
After a weak start this year, China's exports have shown signs of
improvement helped by stronger global growth as well as supportive
domestic policies and the effects of a weaker yuan.
Exports to the United States, China's top export destination, rose
12.3 percent in June, quickening from a rise of 7.5 percent in June,
while those to the European Union, the second-biggest market, grew
17 percent, compared with 13.1 percent in June.
Exports to ASEAN countries rose 11.9 percent in July, accelerating
from 9.7 percent in June, the customs data showed.
Customs spokesman Zheng Yuesheng told state television that China
exports are likely to stay strong in the coming months.
"The external demand is improving as a recovery in major developed
countries underpins the global economy," he said.
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Imports from China's largest source for resources, Australia,
dropped 5.7 percent, partly due to softer commodity prices but the
fall adds to questions over the health of domestic demand.
Some analysts attributed weak imports to the crackdown on commodity
financing following the Qingdao port fraud probe.
Combined exports and imports grew 2 percent in the first seven
months from a year earlier, trailing far behind the government's
full-year target of 7.5 percent.
The record trade surplus and pressure from capital inflows were seen
renewing pressure on the yuan. The currency is poised for its third
consecutive day of gains as the central bank signaled it was
comfortable with stronger levels as the economy was improving.
"With Chinese economic activity improving, we believe that there is
scope for RMB to further appreciate, driven by conversion of onshore
FX deposits and increased foreign portfolio inflows," analysts at
ANZ said in a note.
That could create a fresh headache for China's central bank, which
intervened to weaken the currency earlier this year when it punished
speculators betting on one-way yuan appreciation.
Chinese leaders have pledged to maintain pro-growth policies to help
achieve the annual growth target of 7.5 percent.
The government unveiled a burst of "targeted" policy stimulus since
April, including cutting reserve requirements for some banks,
hastening construction of railways and public housing and allowing
local governments to loosen property curbs.
The Politburo, a top decision-making body of the ruling Communist
Party, said last month that China must maintain a "certain speed" in
its development over the long term to help resolve problems in the
economy
The government is due to release inflation data on Saturday, and
industrial output, retail sales and fixed-asset investment on Aug.
13. New loan and money supply data will be issued between Aug.
10-15.
(Reporting by China economics team; Editing by Jacqueline Wong)
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