[July 10, 2014]BEIJING
(Reuters) - China's trade performance improved in June
but still missed market forecasts, reinforcing
expectations that Beijing will have to unveil more
stimulus measures to stabilize the economy and meet its
2014 growth target.
Exports rose 7.2 percent in June from a year earlier, the best pace
in five months, but well below a median forecast in a Reuters poll
for a rise of 10.6 percent.
Imports also missed expectations, growing by 5.5 percent versus
forecasts of 5.8 percent, although they returned to positive
territory after a small drop in May.
China's combined exports and imports edged up just 1.2 percent in
first six months of the year, data showed on Thursday.
"For the economy to rebound in the second half of this year, we
believe more policy support is necessary due to the unsteady
recovery base," said Wang Jun, economist at the China Centre for
International Economic Exchanges, a think-tank in Beijing.
Premier Li Keqiang said on Monday that economic growth quickened in
the second quarter from the previous three months, but added that
further modest government support measures will still be needed.
Beijing has set an annual growth target of around 7.5 percent.
Since April, China has steadily loosened policy by reducing the
amount of cash that some banks have to hold as reserves, instructing
regional governments to quicken their spending, and hastening the
construction of railways and public housing.
Evidence has mounted in recent weeks that those measures are
beginning to have some effect, arresting a cooldown in activity
which saw growth slide to an 18-month low of 7.4 percent in the
first quarter.
The latest Reuters poll showed the economy probably steadied in the
second quarter, with annual growth holding firm at 7.4 percent as
the policy measures kicked in.
But economists say the recovery still appears patchy, and more
stimulus may be needed to offset the downdraft from a cooling
property market on the broader economy.
Data on Wednesday showed consumer inflation cooled slightly more
than expected in June while producers' prices fell for the 28th
straight month, signaling domestic demand remained lukewarm.
Second-quarter GDP along with June retail sales, industrial output
and investment data will be released on July 16.
The customs office expects exports to pick up in the second half of
the year in line with improving global demand, but spokesperson
Zheng Yuesheng said China will need to "invest arduous efforts" if
it wants to meet its 7.5 percent trade growth target.
Analysts think it may already be too late.
"We think China could miss its target ...We expect combined exports
and imports to rise 5 percent in 2014 from a year ago," said Li
Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.
China's exports were sluggish earlier this year but its trade
performance has gained traction in recent months, helped by an
improving U.S. economy and as the government gave exporters more tax
breaks, credit insurance, and currency hedging options.
Exports to the United States, China's top export destination, rose
7.5 percent in June, quickening from a rise of 6.3 percent in May,
while those to the European Union, the second most important market,
grew 13.1 percent, compared with 13.4 percent in May.
China posted a trade surplus of $31.6 billion in June, down from
$35.9 billion in May.
Recent factory activity surveys, however, have shown a marked
slowdown in growth in export orders, indicating that domestic demand
may have to continue picking up the slack.
(Additional reporting by Xiaoyi Shao; Editing by Tomasz Janowski &
Kim Coghill)
