China trade surplus falls 29.6% as imports gain

China's July trade surplus fell 29.6 percent year-on-year to $17.8 billion, government data showed on Thursday as a bigger-than-expected gain in imports outpaced one in exports.

Exports increased 5.1 percent year-on-year to $186.0 billion, according to figures from Customs, while imports rose 10.9 percent to $168.2 billion.

The results marked a rebound in trade in both directions after exports and imports declined in June, with the gain in imports being the first since April.

Two-way trade rose 7.8 percent year-on-year, slightly lower than the government's eight percent growth target for this year but "showing a stabilising and recovering trend", according to Customs.

The figures surprised economists.

A survey of 14 economists by Dow Jones Newswires had forecast exports to gain a median 2.8 percent and imports to rise 1.3 percent. The median prediction for the trade surplus was $27.2 billion.

Alaistair Chan, an economist at Moody's Analytics, called the results surprisingly good, though cautioned against overoptimism.

"We had expected imports to perform better than exports and hence for the trade surplus to fall, but the jump in imports was higher than expected," he wrote in a report.

But he added: "July seems to reflect a return to a 'normal', relatively uninspiring trend after a weak June, rather than the beginning of an acceleration in growth. While the worst seems to be over, the upturn will be relatively flat."

Yao Wei, a Hong Kong-based economist with Societe Generale said that while the export growth was "reasonable" and reflected a stabilising yet weak foreign demand, the rebound in imports was "confusing".

"Even though the government had announced some supportive measures, they should not show effects so soon — the fundamentals in the economy did not support such a strong rebound," she told AFP.

The trade data come after mixed messages on China's economy last week when private and official surveys of the country's important manufacturing sector showed differing results.

British banking giant HSBC's purchasing managers' index indicated contraction while the government's showed a surprise expansion.

China's economy managed growth of 7.8 percent in 2012, its slowest since 1999.

The economy has since weakened further, with growth in the April-June period dipping to 7.5 percent, from 7.7 percent in the first quarter and 7.9 percent in October-December.

Yao warned that uncertainties would remain in the fourth quarter as authorities turned cautious about credit expansion.

"The key issue is that the central bank does not want credit growth to be too fast or continue for too long a time," she said.

"But infrastructure investment cannot carry on without credit support. This is a contradiction that has yet to be dealt with properly."