China's trade data surge past expectations

Shipping container at China's Dapu Port
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China posted stronger-than-expected trade figures on Thursday, the latest in a string of upbeat data and raising hopes that the world's second biggest economy may be stabilizing.

Exports rose 5.1 percent in July, compared to a Reuters forecast of a 3 percent rise, and much better than the 3.1 percent fall in June.

Meanwhile, imports jumped 10.9 percent in the month, versus expectations of a 2.1 percent rise and following the 0.7 percent drop in June.

Trade surplus came in at $17.8 billion, compared to forecast of $27.2 billion.

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The data triggered swift reaction in the markets.The Australia dollar rose 0.9 percent to $0.9073, while shares in Hong Kong and China rose 0.8 percent and 0.5 percent, respectively, before reversing some of the gains in the late session.

"China trade data for July indicates a rebound of external demand and a re-surgence of domestic demand," said Dariusz Kowalczyk, senior economist and strategist of Asia ex-Japan at Credit Agricole told CNBC.

"All this confirms our view that the economy has bottomed out and will re-accelerate in the second half. We'd like to call the end to worries over China for this year," he added.

The trade figures are the first in a flurry of economic data this week that investors hope will show continued signs of improvement in China's economy.

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The government's twin Purchasing Managers' Index (PMI) reports for the manufacturing and non-manufacturing sectors for July in the past week both came in better than expected, raising hopes that the slowing economy may be getting some of its growth mojo back.

But Alistair Chan, economist at Moody's Analytics, say the numbers reflect similar trade conditions back in April, so it's more a "return to normal conditions" than a bounce.

"At the end of the day exporters are still having to contend with weak global demand, and the currency is quite strong as well so I don't think it's going to be much upside for exports to this year," he said.

"To be honest, I think this is probably as good as it will get – I don't the growth rate is going to continue going much higher," he added.

Little comfort

Other analysts argue that the recent improved economic readings, while reassuring to investors, don't resolve the 'unknown' structural problems in China.

"I've got a very low level of confidence in my assessment of what's going to happen in China between now for the rest of the year," Simon Warner, head of macro markets at AMP Capital said.

(Read more: China fires growth salvo, is monetary easing next?)

"If Chinese GDP stabilizes, then the global economy is going to look fine and dandy in 2014 but the problem is all those 'known unknowns' of structural problems in China like the shadow banking system and appallingly poor capital allocation model," he noted.

According to Wendy Liu, head of China equity research at Nomura, Friday's data –which include inflation, retail sales and industrial output figures – are a better gauge of the economy than the trade numbers.

"People will be looking to tomorrow's numbers more so than today's," said Liu. "There tends to be quite a bit of volatility with the trade numbers on a monthly basis and also, some adjustment as to what's real and what is fictitious trade."