China's trade surplus climbs to $28.7bn after import slump
CHINA'S trade surplus surged unexpectedly in July to an 18-month high as exports beat forecasts and a government induced slowdown in investment took a toll on imports.
Beijing is steering its loose monetary and fiscal policies back to normal after a record surge in credit last year to combat the global crisis. It has reined in lending to local authorities and mounted a drive against property speculation.
The trade surplus of $28.7bn as annual import growth moderated to 22.7pc from 34.1pc in June, is well below forecasts of a 30pc rise, providing clear evidence that the measures are biting.
"We have carried out a proactive adjustment of economic growth. With economic growth slowing down, import growth is also easing," government official Huang Guohua said.
The disappointing figures, which partly reflected a 4.5pc fall in import prices in July, sent the main Shanghai stock index tumbling 2.3pc and weighed on shares across Asia and Europe as investors worried that the global economic recovery was losing momentum.
"We expect import growth to slow further for the rest of the year as the domestic economy is coming off the boil," said Nie Wen, an analyst at Fortune Trust in Shanghai.
Exports, by contrast, held up well in July, rising 38.1pc from a year earlier to a record high of $145.5bn. Export growth was down from June's 43.9pc pace but exceeded projections of a 35.5pc rise, partly because exporters rushed to beat the July 15 removal of tax rebates on an array of steel and other products. Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong, noted that figures due out later this week were likely to show a US trade deficit of more than $40bn.
"This contrast in the trade position of the two most important economies in the world will likely increase the pressure from Washington for Beijing to allow further currency appreciation, particularly in the lead-up to mid-term elections in November," he said.
The yuan has risen just 0.8pc against the dollar since Beijing scrapped a 23-month peg to the US currency on June 19 and reinstated a managed float.
Meanwhile, July housing prices were unchanged from June, though they were up 10.3 pc over a year ago, the government reported.
That came amid lending curbs imposed to cool surging housing costs and prevent a possible price bubble.
"Investors worried the slowing housing prices might hurt profits of real estate developers," said Cao Xuefeng, a researcher for Huatai Securities in the western city of Chengdu.
Resource shares retreated. Jiangxi Copper Ltd, China's biggest metal producer, declined by 4.1pc to yuan, while Aluminum Corp of China declined by 4pc to yuan.
China Petroleum and Chemical Corp, known as Sinopec, gave up 3.8pc to 8.29 yuan.