With excessive demands from the west – U.S., Europe as well as Southeast Asia, China’s exports boosted, leading to a record monthly trade surplus, while its imports shrunk. The surprising news was largely welcome in Beijing, since the world’s second-largest economy currently battles to recover growth rate and foreign-trade drive after witnessing a week start in the beginning this year. Albeit, negative import growth underlines prevailing weak domestic demand.
As per the figures revealed by the General Administration of Customs on Friday, exports rose 14.5% year-over-year. According to 15 top economists in a The Wall Street Journal study, this figure denotes almost twofold the 8% development conjecture and has a sharp climb from the 7.2% year-over-year rise recorded in the month of June. In the meantime, imports fell 1.6% during that period, after a 5.5% on-year growth in June. The study by WSJ predicted a 3% climb.
The dragon nation’s delicate trade surplus extended to $47.3 billion in July from $31.6 billion in June, which was above the $27.7 billion predicted by economists. Previously similar trade surplus was recorded in the November 2008, at $40.09 billion.
Trade analysts stated that the expanded surplus could heap on calls with U.S. export groups to let the Chinese currency appreciate. China’s tight control over Yuan has resulted into an unfair trade advantage by keeping the estimation of trade items low in U.S. dollar terms.
Analysts further stated that the strong exported are stimulated by exports to the U.S., European Union, Southeast Asia, Hong Kong as well as countries like Taiwan and South Korea where Chinese parts are utilized for commercial enterprises.
Exports have also been boosted by yuan that has devalued 1.7% against the U.S. dollar in recent times. Since the data was made public on Friday, Yuan rose to 6.1579 against the U.S. dollar from 6.1619.
Macquarie Group economist Larry Hu said the yuan could reach between 6.05 and 6.10 by the end of 2014. "Indeed, China's exchange surplus has been decently high in many months of the year, and the yuan has begun to bounce back since June."
China intends to restore its economy far from a conventional dependence on exports as well as investment in support for consumption, technology as well as services. However, pressures to increase employments, increase growth and to cut down social unrest in 2014 have forced the country to adopt its old patterns temporarily.
Even though exports have grown more than anticipated, analysts believe this will not affect Beijing’s monetary policy approach. “We’ll still see targeted easing,” predicted CIMB economist Fan Zhang. By and large, the central bank is most likely to support growth without taking measures which could increase China’s debt burden. Beijing has taken initiatives to support exports. This year, China’s cabinet announced measures to accelerate export-tax rebates and expand credit to importers and exporters. Central Bank also encouraged banks to find innovative measures and loan more to exporters in order to boost export.