(Bloomberg) -- China’s exports rose in July as economic activity in the rest of the world started resuming , while an unexpected contraction in imports signaled the ongoing fragility of the domestic recovery.
- Exports rose 7.2% 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% while imports would increase by 0.9%.
- The yuan gained 1.3% against the dollar in July.
Key Insights
- 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.
- While China is increasing the amount of goods it buys from the U.S. under the trade deal, bilateral relations are deteriorating rapidly across a broad range of issues, with both sides shutting down consulates, the U.S. pushing a possible ban on Chinese tech firms including Tiktok and fights over Hong Kong and Taiwan. That has kindled global fears of a new Cold War that might drag trade and the global economy deeper into recession.
- 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 it’s unclear what that will mean in practice.
- “Exports should still stay resilient as global demand recovers from relaxation of mobility restrictions while production resumption elsewhere may cap demand for Chinese products somewhat,” UBS economists Tao Wang and Ning Zhang wrote in a report before the data was released. “With most economic activities rebounding to pre-Covid levels, we see a notable slowdown in sequential momentum in the second quarter, though activities should continue to improve further assuming that Covid-19 remains under control in China.”
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