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China’s exports jumped in July on stronger US, global demand

Bloomberg | Updated on August 07, 2020 Published on August 07, 2020

Shipping containers sit at the Yangshan Deepwater Port in this aerial photograph taken in Shanghai, China, on Sunday, July 12, 2020   -  Bloomberg

Exports rose 7.2 per cent in dollar terms in July from a year earlier, while imports fell 1.4 per cent, the customs administration said

China’s exports rose in July as economic activity in the rest of the world recovered and shipments to the US jumped, while imports unexpectedly contracted due to falling commodity prices and the ongoing fragility of China’s own recovery.

Exports rose 7.2 per cent in dollar terms in July from a year earlier, while imports fell 1.4, the customs administration said Friday. That widened the trade surplus to $62.33 billion in the month. Economists had forecast that exports would fall by 0.6 per cent while imports would increase by 0.9 per cent.

China-US relations have soured further recently across a broad range of issues, with both sides shutting down consulates, the US pushing a ban on Chinese tech firms including TikTok, and fights over Hong Kong and Taiwan. As rising geopolitical tensions kindle global fears of a new Cold War, companies are also responding to pent-up demand following lengthy shut downs in some parts of the world.

‘Bumply road ahead’

The road ahead may be bumpy as new export orders remain weak and the recovery path will be uneven across economies, said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong. Imports disappointed a bit, but as commodity prices are still down substantially from a year ago, this implies that import volumes continued to expand, he said.

Exports to the US rose 12.5 per cent in July from a year ago, the fastest rise since 2018. The magnitude of the jump is probably due to front-loading activity ahead of a worsening US-China relationship. said Tommy Xie, an economist at Oversea Chinese Banking Corp in Singapore. Imports from the US rose 3.6 per cent.

President Xi Jinping is also accelerating his push for a more economically independent China with a new emphasis on a so-called dual circulation model, which tilts toward domestic markets, although its unclear what that will mean in practice.

What Bloombergs Economists Say...

The recovery in exports should continue, as long as demand in major trading partners continues to revive. Imports should get more support from the recovery in domestic demand, though it will take considerable time for imports to get back to pre-pandemic levels. There are also increasing risks to trade, such as the worsening relations with the US and fresh waves of Covid-19 outbreaks.

- David Qu, Bloomberg Economics

Chinese factory managers saw continued recovery momentum in July. However, a set of the earliest indicators for activity in the month show that the effects of stronger market sentiment was damped by muted consumer demand.

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Published on August 07, 2020
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