China’s trade surplus expands amid decline in imports

China's leaders have already moved to revive growth, cutting interest rates twice since the beginning of June, and the trade data fuelled expectations that they will act again over the next few months.

The trade surplus hit $31.73-billion in June, up 42.9% from the same month last year, the General Administration of Customs said.

While exports for the month rose 11.3% year-on-year to $180.21-billion, imports climbed just 6.3% to reach $148.48-billion, according to the government's data.

"While exports increased at a low level, growth of imports was sharply slower than exports as domestic demand declined due to China's slowing economy," customs spokesman Zheng Yuesheng told reporters.

Compared with May, exports in June declined 0.5% and imports were down 8.9%.

"The data overall suggest that domestic investment and global growth are slowing," Alaistair Chan, an economist with Moody's Analytics, said in a research report.

China's economy expanded an annual 8.1% in the first quarter of 2012, its slowest pace in nearly three years.

Expecting growth
Before the trade figures were announced, analysts were already expecting growth in China to have slowed in the second quarter.

China reported on Monday that inflation had slowed to 2.2% in June, the lowest level since the start of 2010.

The central bank's announcement last week of the second interest rate cut was also widely seen as a signal that China's economy was slowing.

The government is scheduled to release the gross domestic product for the second quarter on Friday.

"China will definitely continue to introduce monetary easing policies," said Citic Bank International's chief economist, Liao Qun.

"There may be one interest rate cut and two cuts in the banks' reserve requirement ratio in the second half."

The reserve requirement ratio is the amount of money that banks must hold in reserve. Lowering the ratio injects more cash into the economy.

Diversification strategy
While the trade data was generally seen as a disappointment, the customs administration's Zheng said China still hoped to meet its goal of 10% import and export growth this year if Europe's financial crisis did not worsen.

He attributed this partly to a diversification strategy to emerging markets.

"Trade growth almost stagnated with the EU, Japan and other traditional markets, but steadily grew with emerging markets," Zheng told reporters.

He said another reason for the weak trade performance was sluggish foreign direct investment in the country, which has either fallen or remained flat since November last year.

He said this translated into fewer exports by related foreign companies in China.

Total trade, or exports and imports combined, increased by 8% from January to June to $1.84-trillion, falling short of Beijing's growth target of 10% for the full year, according to the official data.

Exports for the first six months of the year climbed 9.2% to $954.38-billion, while imports rose 6.7% to $885.46-billion. – Sapa-AFP


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