World Economy

China exports recover in June, imports still weak

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China's exports staged a modest recovery in June, however imports continued to slide as the world's second largest economy continues to grapple with overcapacity, official data showed on Monday.

Exports rose 2.8 percent in June from a year earlier, beating expectations of a 0.2 percent fall as predicted in a Reuters poll and after a 2.5 percent drop in May.

Imports slipped 6.1 percent on year, but came in well above forecasts for a 15.0 percent decline and following a 17.6 plunge percent in the previous month.

This brought the trade surplus for the month to $46.54 billion, compared with the $55.7 billion forecast and May's print of $59.5 billion.

"The rise in China's export growth was consistent with better exports elsewhere, such as Korea, suggesting that external demand may have improved. The smaller contraction in imports in June, despite lower commodity prices, points to a sequential improvement in domestic demand," Yang Zhao, economist at Nomura wrote in a note.

The Australian dollar edged higher following the release of the data, rising 0.2 percent against the greenback. The currency tends to be sensitive to Chinese economic data due to Australia's large trade exposure to the mainland.

China's customs department attributed weak exports in the first half of the year to soft external demand, rising labor costs and yuan appreciation. Meanwhile, it said overcapacity in the domestic economy is damping import demand. Nevertheless, it expects the country's trade performance will improve in the second half of the year.

"The soft trade data in Q2 suggest that China's Q2 GDP will underperform," Li-Gang Liu, chief China economist at ANZ wrote in a note.

China's trade numbers come days before the release of its highly anticipated gross domestic product (GDP) release on Wednesday, which is expected to show the economy slowed further in the second quarter. Economists predict growth dipped below 7 percent in the April-June period, following 7 percent expansion in the first quarter of 2015 - the weakest showing since 2009.