China export growth accelerates in July, but imports lag

HONG KONG – China’s July export growth grew strongly at 14.5% y-o-y due to improving demand from both developed and emerging markets, but import growth continued to be weighed down by a weakness in the value of commodity imports. This led to a record trade surplus of US$47 billion.

Ordinary exports (mostly labour-intensive products) rose 16% on-year (9% in June), while processing exports rebounded strongly to 11.0% (1.0% in June).

Exports to G3 markets posted another month of strong performance, growing 13% on-year, up from 8% in June. Exports grew by 17% to the Eurozone, 12% to the US, and 3% to Japan, up from 13%, 8% and -1% in June respectively.

Exports to non-G3 markets also rebounded strongly, led by strong growth vis-à-vis Korea (32% in July vs. 0% in June), and ASEAN (12% in July vs. 10% in June). Exports to Hong Kong also rebounded to 15%, from 7% in June. But it was not a main driver for the improvement in July. After removing Hong Kong, non-G3 (ex HK) demand rose by 16% in July, up from 6% in June.

In a research note, HSBC said it had been expecting exports to do well as external demand improves, and the growth number was in line with HSBC’s general view for the second half of 2014.

“Weak import growth may be a reflection of the targetted manner of the stimulus measures this year that resulted in less demand for imported commodities as well as high inventory levels,” HSBC said. “Falling commodity prices also contributed. As domestic demand continues to improve, we expect import growth to improve modestly in the coming months.” www.hsbc.com (ATI).