China posts surprise trade gains as economies try to reopen

China’s exports and imports both rose in June, signaling that demand at home and abroad may have started to recover even as the pandemic continues to ravage the global economy.

Exports rose 0.5% from a year ago, while imports expanded 2.7%. Both had been forecast by economists to fall. The trade surplus shrank from a record-high in May to $46.4 billion last month.

The surprising increases come as some developed economies started to reopen, with gauges for manufacturing activities across the globe improving in June. Shipments of masks and other medical supplies also contributed to the expansion of exports, and imports were helped by economic recovery at home.

“Demand for Chinese exports is improving in key markets like the U.S. and EU as lockdowns are being eased and consumer spending rebounds,” said Rajiv Biswas, chief Asia-Pacific economist at IHS Markit Ltd. in Singapore. “The strong rebound in PMI indexes for the U.S. and Eurozone in June signals further gradual improvement in Chinese exports in the second half of 2020, particularly as retailers start to place orders for the Christmas season.”

What Bloomberg’s Economists Say

A rise in imports “points to firmer domestic demand that could become more supportive of what’s so far been an industry-led recovery.” The recovery in domestic demand should continue, which would buoy imports in real terms, and the recent rise in commodity prices could buoy the nominal value of imports.

David Qu, Bloomberg Economics

However, even with the turn up in June, trade in the first six months of the year is still well down on the same period last year. Exports in dollar terms through the end of June were 6.2% smaller than in 2019, while imports were 7.1% lower.

In yuan terms, exports grew 4.3% in June from a year earlier, while imports rose 6.2%, the customs administration said Tuesday.

In the first half, exports of textile products including face masks surged by 32.4% in yuan terms. Exports of medicines and pharmaceutical products, and that of medical equipment increased by 23.6% and 46.4%, respectively. Driven by the increase of people working from home, exports of laptops increased 9.1%, according to the data.

Positive net exports will provide some support to Chinese gross domestic product growth in the second quarter, after the historic 6.8% collapse in the first three months. The reading for GDP will be released Thursday.

U.S. Economic Recovery Loses Momentum With Virus Cases Surging

Positive news aside, countries such as the U.S. still have a long way to go to get the outbreak under control and there’s no sign of when global demand for Chinese exports will recover sustainably to pre-virus levels. The deterioration of relations with the U.S. adds to the uncertainty for trade, although China has been stepping up efforts to meet the terms of the trade deal.

“Looking forward, we expect July data to see some weaknesses and exports to be under pressure in the second half of the year,” said Xing Zhaopeng, markets economist at Australia & New Zealand Bank Group Ltd.