China’s June Trade Figures Bolster Optimism For Q2 GDP Rebound

WE ARE DUE to get a reading on China’s economic recovery on Thursday with the publication of the second-quarter GDP figures.

The consensus forecast of economists is 2.5% year-on-year growth, turning around the 6.8% decline in the first quarter, which was slammed by the onset of Covid-19. Stimulus measures, including more fiscal spending, tax relief and cuts in lending rates and banks’ reserve requirements, should be starting to take effect.

Today’s trade figures provide some support for that outlook. Both exports and imports rose in June, reversing year-on-year falls the previous month. Exports rose by 0.5% year-on-year in June after falling by 3.3% in May, and merchandise imports rose by 2.5% year-on-year having fallen by 14.2% and 16.7% in April and May, the General Administration of Customs reported.

The numbers require some careful unpicking, however,

First, although increased exports reflect demand beginning to recover in the rest of the world as countries reopen, within China supply is recovering faster than demand, suggesting a drag on growth.

Second, imports from the United States rose by 11.3% year-on-year after three months of double-digit declines. A clue to why lies in China’s total imports of agricultural products, up 17.8% in June year-on-year after a 29.0% gain in May; imports of soya beans rose by around one-third for a second month.

Separately, the US Department of Agriculture reported that China has made to of its three biggest single-day purchases of corn within four days of each other in July, a total of 3.12 million tonnes of the grain.

This suggests efforts on Beijing’s part to implement the Phase One US-China Trade Agreement signed in January, despite the frayed relations between the two countries over a range of geopolitical issues from the Covid-19 pandemic to renewed contestation over the South China Sea.

Nonetheless, China’s US purchases are behind pace to meet the ambitious goals of an additional $200 billion of additional US imports, $80 billion of which are to be agricultural produce. However, China has until the end of the stipulated two years to meet the targets. In contrast, US Donald Trump needs demonstrable evidence his trade deal is working ahead of November’s US presidential elections.  

1 Comment

Filed under Agriculture, China-U.S., Economy, Trade

One response to “China’s June Trade Figures Bolster Optimism For Q2 GDP Rebound

  1. Pingback: Unevenness Will Keep China’s Economic Recovery Modest | China Bystander

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