China Trade Data Points to Sagging Economy -- Update
BEIJING--China's foreign trade stumbled last month, as both imports and exports fell, despite Beijing's efforts to revive domestic demand.
Chinese exports fell 1.3% in June from a year earlier, after rising 1.1% the previous month, the General Administration of Customs said Friday. Imports fell 7.3% in June versus a 8.5% drop in May.
Economists had expected continued weakness in foreign trade due to the volley of tariffs between the U.S. and China, sluggish demand and weaker commodities prices, but imports dropped more than expected.
"Imports and exports are both fairly weak, especially trade with the U.S.," said Shuang Ding, an economist at Standard Chartered.
President Trump and Chinese President Xi Jinping agreed to resume trade talks at the Group of 20 leading economies meeting in Osaka, Japan, last month. This week, top American and Chinese negotiators spoke on the phone as part of that effort. But people following the process say the issues that stalled talks two months ago remain.
China's exports to the U.S. fell 7.8% in June from a year earlier, extending a 4.2% decline in May, customs data show. Imports from the U.S. tumbled 31% from a year earlier. The bilateral trade surplus widened to $29.92 billion--the highest in seven months--from May's $26.9 billion.
Bucking the trend, exports to Southeast Asian countries surged nearly 13% in June, extending May's 3.5% growth, possibly a sign of transshipping to circumvent the tariffs.
"While a cease-fire of the trade war sent out positive signals, China's export outlook is still overshadowed by higher U.S. tariffs and slack global demand," said Betty Wang, an economist with ANZ.
Some exporters may front-load shipment to the U.S. in coming months as the outlook for trade talks remains unclear, Ms. Wang said.
The sluggish external and local demand, evident in Friday's data, could push Beijing to roll out more stimulus measures to stabilize economic growth in the second half, said Mr. Ding, of Standard Chartered. Slowing growth, muted inflation and global central banks turning dovish all build the case for China's central bank to cut key market rates, Mr. Ding said.
The government has rolled out measures to stimulate the economy, including cutting taxes for businesses and easing restrictions on local governments' funding for infrastructure projects, but business sentiment and investment remain low.
More policy help seems to be on the way. Chinese banks increased their lending in June, and local governments stepped up bond issuance to support investment.
Chinese banks issued 1.66 trillion yuan ($242 billion) in new loans last month, up from 1.18 trillion yuan in May and in line with economists' expectations, central-bank data showed Friday. Total social financing, a broader measure of credit in the economy that includes local-government bonds, surged to 2.26 trillion yuan in June from 1.4 trillion yuan in May.
Strong credit data reflects Beijing's intention to support economic growth, but policy makers will turn down the scale of stimulus compared with the previous rounds of economic slowdown due to concerns over financial risks, Ms. Wang said.
One bright spot is the trade surplus. China's overall trade surplus widened sharply to $50.98 billion in June from $41.65 billion in May, official data showed.
China's current-account surplus, which includes trade, could help support the yuan exchange rate, which suffered due to trade and economic uncertainties, Mr. Ding said.
Liyan Qi, Grace Zhu and Lin Zhu