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TRADE WARS
China trade performance improves on stronger exports
by Staff Writers
Beijing (AFP) Sept 08, 2013


China inflation eases to 2.6% year-on-year in August
Beijing (AFP) Sept 09, 2013 - Chinese inflation slowed to 2.6 percent year-on-year in August, the National Bureau of Statistics said Monday, giving the government more room to unveil new measures to boost the world's number two economy.

The rise in the consumer price index, a main gauge of inflation, was slightly lower than July's 2.7 percent.

In the first eight months of the year, the CPI rose 2.5 percent year-on-year, below both the government's 3.5 percent target for 2013 and a touch below the 2.6 percent seen in 2012.

"The low CPI inflation means that the new government still has spacious room for bolstering growth via implementing a mini fiscal stimulus and avoiding monetary tightening, and the rising PPI inflation suggests the economy has been recovering," Bank of America Merrill Lynch economists said in a research note.

Authorities said food prices were the main driver of the August increase, with meat, egg and vegetable costs all going up, partly due to higher than average temperatures and lower rainfall, Yu Qiumei, a senior NBS analyst, said in a statement.

China's producer price index (PPI), which measures prices of goods at the factory gate, rose 0.1 percent in August from July, according to the NBS. It was the first increase in six months and came after five months of deflation.

"The changes in PPI showed that... trends of the national economy stabilising and rebounding are becoming clear," said Yu.

The PPI fell 1.6 percent year-on-year in August, up from a 2.3 percent decrease in July and the highest reading in six months, NBS data showed.

The inflation figures followed a string of data in recent weeks indicating that the Chinese economy, a key driver of global growth, is showing signs of rebounding following a downtrend in the first half of the year.

The economy expanded 7.7 percent last year, the slowest since 1999.

In the final quarter of last year, growth accelerated to 7.9 percent, but has slowed in successive quarters to 7.7 percent in January-March and 7.5 percent in April-June.

But the world's largest exporter posted better sales last month with stronger-than-expected exports growth of 7.2 percent year-on-year to $190.6 billion as demand in overseas markets improved.

A measure of China's manufacturing activity also strengthened in August to its highest level in 16 months, with the closely watched official purchasing managers' index (PMI) rising to 51.0 from 50.3 in July. A reading below 50 indicates contraction, while anything above signals expansion.

Another PMI measure released by HSBC rebounded to 50.1 in August, its first month of expansion since April.

China's trade performance was better than expected in August, as stronger exports to recovering overseas economies caused the trade surplus to widen to $28.5 billion, customs figures showed Sunday.

Improved exports, a key driver of growth for China, are a positive sign for the world's second largest economy, which has struggled since early this year, analysts said.

The trade surplus rose 8.4 percent from the same month last year, customs said in a statement on its website, revising figures given earlier on Sunday. The surplus also widened from $17.8 billion in July.

Analysts had forecast a trade surplus of $20.4 billion, according to a survey of 11 economists by Dow Jones Newswires.

"The surplus is higher than expected thanks to strong exports. The figures are good and show an upward trend in China's trade," Liao Qun, an economist at Citic Bank International, told AFP.

"China's export markets began to grow strong again as the United States is back on track and Europe is stabilising," he said.

Exports jumped 7.2 percent year-on-year to $190.6 billion last month, customs said in a statement on its website, revising figures given earlier on Sunday without explanation.

Economists had forecast a 6.0 percent annual rise in exports for August, Dow Jones Newswires said. In July, exports grew just 5.1 percent on the year.

"China's August trade sustained the upward trend seen since July, in line with accelerating growth momentum and improving market sentiment," bank ANZ Group said in a research report.

But pressure on the yuan to appreciate was likely to continue on hefty trade surpluses and central bank intervention, it said.

Besides weak demand, China's exports have also been hurt by appreciation of the yuan, which makes its products more expensive overseas, analysts say.

Separately, imports rose a weaker-than-expected 7.0 percent to $162.1 billion in August, less than the 11.7 percent rise forecast by analysts.

Weak imports could still be a sign of worry for the economy, signalling that domestic demand is faltering, analysts said.

"The import figure is lower than expected, indicating that the demand from the domestic market is not that strong," Ma Xiaoping, a Beijing-based economist for British bank HSBC, told AFP.

"However, there is no need to worry too much, as the effect of stimulus policies revealed earlier this year and the rebound in domestic demand will take time to realise," she said.

The market is watching for signs of recovery in China, which the global economy relies on to sustain growth.

China's economy expanded 7.7 percent last year, the slowest growth since 1999.

In the final quarter of last year, growth accelerated to 7.9 percent, but has slowed in successive quarters to 7.7 percent in the first quarter and 7.5 percent in the second quarter.

However, China's manufacturing activity strengthened in August to its highest level in 16 months, official figures showed, with the closely watched purchasing managers' index (PMI) rising to 51.0 from 50.3 in July.

Another PMI measure released by HSBC rebounded to 50.1 in August, its first month of expansion since April. A reading below 50 indicates contraction, while anything above signals expansion.

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