Foreign trade picks up, short of expectation

Steady domestic growth, recovering intl demand help trade rebound

Chinese imports picked up, while export numbers also improved slightly in the world's largest trading nation in June, although growth was less than expected.

Though challenges remain, trade is projected to rebound in the second half of the year, a customs official said on Thursday.

Exports recorded 7.2 percent year-on-year growth in June, below a market consensus of 10.4 percent, and a 0.2 percentage point increase from May's figures. Imports in June increased 5.5 percent year-on-year, versus a 1.6 percent year-on-year fall in May, customs data showed.

China's trade surplus totaled $31.6 billion in June, narrowing from May's $35.9 billion.

"Despite being below consensus, June exports expanded at a healthy pace and are consistent with export growth momentum in the first five months of 2014," Lu Ting, chief China economist at Bank of America Merrill Lynch, said in a research note on Thursday.

The customs data showed exports worth $1.06 trillion and imports of $959 billion during the first six months of 2014, up 0.9 percent and 1.5 percent from a year earlier, reversing a decline during the first five months of the year.

Trade with the EU and US - China's top two trading partners - grew by 9.6 percent and 2.8 percent year-on-year.

Export growth was helped by stable external demand and supportive trade policies, Zheng Yuesheng, spokesperson of the General Administration of Customs, said at a press conference in Beijing.

Steady economic growth at home, recovering external demand, and disappearance of an inflated trade base that emerged during January to April 2013 should lead to a better trade outlook during the second half of the year, he said. Many analysts speculated that the inflated trade base was the result of domestic companies' round-shipping goods to increase export figures.

"Trade growth is expected to accelerate in the third quarter … yet the 7.5 percent trade growth target for this year remains a tough mission," Zheng said.

China's labor-intensive exports occupied a declining share of trade with major trading partners including the US, the EU and Japan, ceding ground to cheaper labor in Southeast Asian nations like Vietnam, India and Bangladesh, Zheng noted.

Rising labor costs and restraints on energy consumption weakened the competitiveness of China's labor-intensive exports.

Initiatives adopted by developed markets to revitalize their own manufacturing sectors have led to cooling foreign direct investment in China, which has had a negative impact on Chinese manufacturing exports, Zheng said.

Frequent trade frictions and remedial actions taken by the trading partners have also weighed on China's export prospects, he said.

Official data show that China was on the receiving end of 92 trade remedy investigations by trade partners, worth a total of $3.66 billion in trade, during 2013. Trade protectionism has intensified this year, with the US filing six cases against Chinese exports in May alone, while the EU slapped antidumping and countervailing duties on solar glass from China. Solar glass is used in solar panels for its exceptional ability to transmit light.

A fall in commodity prices, including iron ore, coal and soybean, is expected to extend into the second half of the year, which will be a drag on China's trade figures, Zheng said.

"The trade surplus exceeded $30 billion again in June, and it continues to add pressures on yuan appreciation in the foreseeable future. Large trade surplus amid the Sino-US Strategic and Economic Dialogue has again put the yuan in the spotlight, facilitating renewed yuan appreciation," Liu Ligang, chief China economist at ANZ Banking Group, said in a research note on Thursday.

An appreciating yuan will weigh on Chinese exports.

"It is still hard to be optimistic about the trade figures," Xu Gao, chief economist at China Everbright Securities Co, told the Global Times on Thursday.

Both exports and imports in June fell by 4.4 and 2.7 percent from May despite modest year-on-year growth, customs data showed.

An economic recovery in the US will likely not offset slackening economies in the EU and Japan during the next few months, indicating limited external demand for China's exports, Xu said.

The General Administration of Customs is mulling an expansion to the Shanghai free trade zone pilot program for simplifying customs declaration procedures across more of China's regions as a way to facilitate trade, Zheng said.

An integrated customs declaration system in Beijing and Tianjin started operation on July 1, enabling traders to save 20 to 30 percent on declaration and logistics costs.

The new system will extend to Hebei Province on October 1. Shanghai, Zhejiang and Jiangsu will undergo the same integration process in October, with extension to a further eight provinces and municipalities along the Yangtze river by early 2015, he noted.