China Reports Record Trade Surplus

China’s trade surplus surged to a record in July as export growth unexpectedly accelerated and imports fell, suggesting the U.S. and European recoveries will help sustain expansion in the world’s second-largest economy.

Overseas shipments increased 14.5 percent from a year earlier, the Beijing-based customs administration said today, beating all estimates in a Bloomberg News survey that had a median projection of 7 percent. Imports dropped 1.6 percent, leaving a trade surplus of $47.3 billion, bigger than all analyst estimates.

Sales to the biggest markets of the U.S. and Europe surged, indicating strength in demand that will reduce pressure on Premier Li Keqiang to expand stimulus in the second half to bolster growth. The report contrasts with the International Monetary Fund’s estimate last month of a slowdown in the U.S. economy that accompanied a cut in its global growth outlook.

“Exports have become a particularly important factor supporting Premier Li’s 7.5 percent growth target,” said Dong Tao, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. “Exports may continue to grow at a double-digit rate, or at least close to double digits, in the coming months.”

The record high trade surplus in July and an anticipated improvement in trade will help to support a “steady yet small” appreciation in the yuan, Tao said.

The yuan strengthened after the report, rising 0.08 percent to 6.1570 per dollar at 3:01 p.m. in Shanghai, and was headed for the biggest weekly advance since June. The Shanghai Composite Index reversed losses to gain 0.3 percent at the close. The MSCI Asia Pacific Index of stocks was down 1.3 percent at 4:05 p.m. in Tokyo.

Record Surplus

The pickup in exports follows June’s 7.2 percent increase and compares with analysts’ estimates for gains ranging from 2.9 percent to 10 percent. The median projection for imports was a 2.6 percent increase, after a 5.5 percent jump in June, and the trade surplus was forecast at $27.4 billion, following $31.6 billion the previous month.

China’s exports to the European Union rose 17 percent in July from a year earlier and shipments to the U.S. jumped 12.3 percent, the biggest gain since November, based on customs data compiled by Bloomberg. Sales to countries in the Association of Southeast Asian Nations gained 11.9 percent.

The trade surplus for the first seven months widened to $150.6 billion from $125.9 billion in the same period last year. The previous monthly record was $40.1 billion in November 2008.

The excess in July may partly reflect capital inflows, though there’s no clear evidence of that, Hua Changchun, China economist at Nomura Holdings Inc. in Hong Kong, said.

Currency Gains

The surplus suggests pressure on the yuan to appreciate will probably increase if the central bank doesn’t actively intervene in the foreign-exchange market, economists at Australia & New Zealand Banking Group Ltd. wrote in a report after the release.

Part of the drop in imports may be attributable to falling commodity prices. Iron-ore imports in the first seven months of the year rose 18.1 percent by volume while the average price fell 14.5 percent, the customs administration said. Crude oil imports rose 7.2 percent by volume and the average price declined 1 percent, and the average price of soybeans dropped 3.9 percent while the volume jumped 20.2 percent.

Ten of 48 economists in a Bloomberg News survey had projected a decline in July imports.

Nomura’s Hua said the comparison base last year for imports was high, so today’s numbers don’t necessarily show worsening domestic demand.

Property Slump

China’s economy has entered the second half with a mixed picture of growth in factories and service industries. While an official index showed manufacturing expanded in July at the fastest pace in more than two years, a private gauge of services dropped to a record low, hurt by a real-estate slump.

Trade will rebound in the second half as incentives take effect and demand from developed nations increases, Shen Danyang, a Commerce Ministry spokesman, said in a briefing last month.

The IMF last month said the global economy will expand 3.4 percent in 2014, less than its 3.6 percent prediction in April. The report reflected a world rattled by geopolitical risks that have risen since April, including the potential for “sharply higher oil prices” because of recent Middle East unrest.

The fund lowered its U.S. growth forecast to 1.7 percent from 2.8 percent before the world’s largest economy reported second-quarter expansion at a 4 percent annual pace, exceeding analysts’ estimates.

The National Bureau of Statistics is scheduled to release July inflation data tomorrow and figures on industrial output, fixed-asset investment and retail sales next week. The central bank will publish credit and money-supply numbers by the middle of the month.

— With assistance by Xin Zhou

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