Trade data improve economic prospects

China's exports in July rose 5.1 percent year-on-year after sliding 3.1 percent in June, the General Administration of Customs said. Imports surged 10.9 percent, compared with the 0.7 percent decline in June. "The July figures are satisfactory," said Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a government think tank. "Exports returned to the normal growth track and the sharp rebound of imports signals the easing of downward pressure on the Chinese economy," Huo said.

Global stock markets responded positively to China's data as shares jumped in Sydney, Seoul, Hong Kong and European cities on Thursday. The Chinese economy recorded its worst performance in 13 years in 2012, with GDP expanding 7.8 percent. Growth dipped to 7.7 percent in the January-March period and slowed further to 7.5 percent in the second quarter. The July trade figures soothed worries that China's economy may experience a hard landing.

Chen Hufei, a researcher at Bank of Communications, said the improvement in exports came after a recovery in demand for Chinese goods, although the recovery is not solid. China's shipments to the United States and the European Union, its top two markets, increased in July for the first time in five months. July exports to the US climbed 5.27 percent year-on-year and those to the EU gained 5.87 percent. Jean-Paul Larcon, a professor of strategy and international business at HEC Paris, said the recovery in China's exports to the EU was "because Europe is gradually recovering and European enterprises are starting to import more from China and the rest of the world".

"I am optimistic about the future trade prospects," Larcon said. "The economic recovery is on track (in the EU). The trade data is a good sign that we are going out of the bottom of the crisis. So in the next six months, the situation could be better and major economic indicators could be back to the normal level." China's exports are shifting to a moderate rate of growth from the double-digit expansion of past years, but economic transformation and restructuring helped exporters retain their markets, Huo said. Huo expressed confidence that the country can achieve its 8 percent trade growth target for the year.

Source: Southwoood Group