The economy is gradually emerging from a record contraction in the first quarter but the recovery is fragile as rising coronavirus cases around the world and renewed lockdowns could hit demand. Chinese consumer spending was subdued amid job losses and concerns about a resurgence in infections.
The country’s export performance, however, has not been as severely affected by the global slowdown as some analysts had feared, while signs of stabilisation in the domestic economy have reduced the urgency for more stimulus.
Exports in July rose 7.2 per cent from a year earlier, the fastest pace since December last year, Customs data showed yesterday, confounding analysts’ expectations for a 0.2 per cent drop and quickening from a 0.5 per cent increase in June.
However, imports fell 1.4 per cent, missing market expectations for a 1.0 per cent increase.
“The data is in line with our forecast for exports to recover more decisively in H2 alongside the global economy,” Mr Tommy Wu, lead economist at Oxford Economics, said in a note, adding that external demand for other products, besides medical supplies, will recover gradually as global industrial production starts picking up.
“However, the road ahead may be bumpy as new export orders remain weak and the recovery path will be uneven across economies.”
Analysts attributed the year-on-year dip in July imports to weaker commodity prices and payback following strong shipments in the previous year. They are optimistic that a ramp-up in infrastructure projects on the back of policy support will lift import growth.
The country’s trade surplus for July stood at US$62.3 billion (S$85.4 billion), up from a surplus of US$46.4 billion in June.
A risk for China’s trade outlook this year is heightening US-China tensions which are expected to escalate ahead of the US presidential election. The country’s trade surplus with the United States widened to US$32.5 billion in July from US$29.4 billion in June.
China’s imports from the US in July rose 3.6 per cent from a year earlier, slowing from a 11.3 per cent gain in June. In January-July, imports fell 3.5 per cent, falling short of the commitments made in the Phase 1 trade deal to increase purchases of American goods.
Senior US and Chinese officials are set to review the implementation of the Phase 1 trade deal and likely air mutual grievances during a video conference on Aug 15.