Trade rebounds sharply

China's exports and imports rebounded sharply in July, beating market expectations, customs data showed Thursday, offering a positive sign that the economy is improving after a downward drift in the first half of the year.

Exports rose 5.1 percent year-on-year in July, rebounding from a 3.1 percent fall in June, the General Administration of Customs (GAC) said on Thursday.

Imports surged 10.9 percent in July from a year ago, compared with a 0.7 percent drop in June, the data showed.

The figures left the trade surplus to narrow by 29.6 percent year-on-year to $17.8 billion in July, as the increase in imports outpaced that of exports.

"External demand has seen a seasonable recovery as the production and business climate indices in major overseas economies have improved recently," Chen Hufei, an analyst at the Bank of Communications, said in a report sent to the Global Times Thursday.

"July's data is more trustworthy compared with data earlier this year which was inflated with fake invoices. This could be viewed as normalization of the trade data," Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times.

"The narrowing of the trade surplus indicates that the faster import growth was driven by rising internal demand as the government stepped up efforts to stabilize the economy and speed up infrastructure construction," Bai said.

The government has issued a raft of measures including accelerating the redevelopment of shantytowns, speeding up the construction of infrastructure including railways and underground urban pipelines, in a bid to stabilize economic growth, which slowed to 7.6 percent in the first six months, the weakest first-half performance in three years.

Also in a bid to boost foreign trade which posted an abrupt decline in both exports and imports in June, the State Council, the country's cabinet, announced a series of measures including simplifying customs clearance procedures, reducing administrative fees and providing zero tariffs for exporters in the service sector.

Thursday's data also showed the country's total foreign trade grew 7.8 percent year-on-year in July, below the annual growth target of 8 percent.

Bai warned that the continuous appreciation of the yuan exchange rate against the dollar in recent days will weaken the competitiveness of exporters.

The spot yuan rate closed at 6.1192 against the dollar Wednesday, the strongest level since the country unified the market exchange rates at the end of 1993 after the central bank set its central parity rate of the yuan against the US dollar to 6.1726 early that day. The spot rate closed at 6.1207 on Thursday, though weakening from Wednesday's figure but still at a strong level.

The State Information Center, a government think tank, also said in a report Wednesday that China needs to keep its currency exchange rate stable in the short term to ease the burden on the country's exporters. It predicted that exports would rise around 9 percent year-on-year in 2013 and imports will increase by 7.3 percent.

"Export growth will likely remain at single-digit paces over the rest of this year and the annual target of trade growth is still achievable if the global demand continues to improve," Wang Qinwei, a China economist at London-based Capital Economics, told the Global Times in an e-mail.

Monthly economic data released so far has offered hopes that the economy may have improved but it is still early to conclude that the economic recovery has stabilized, analysts said.

"July trade data is supportive of a better economic outlook for China and will surely help boost market confidence," Lu Ting, a China economist with Bank of America Merrill Lynch, said in a research note sent to the Global Times Thursday.

The official Purchasing Managers Index (PMI) rose to 50.3 in July from 50.1 in June, above the boom-bust line of 50, while the non-manufacturing PMI increased to 54.1 in July from 53.9 in June, data released last week showed.

"It's hard to say whether the economic recovery has fully gained a foothold. More economic data due to be released in the coming days will shed more light on the economic situation," Yang Xiaowei, an analyst with Lianxun Securities, told the Global Times.

The National Bureau of Statistics will publish a series of economic figures Friday including the Consumer Price Index, retail sales and fixed-asset investment.