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Optimism as export decline lessens

THE declines in China's exports and imports eased in June, sending an encouraging signal that trade -- the sector hardest hit by the global financial crisis -- may have finally bottomed out.

Economists said the improving trade data support their confidence in a recovery, and they called on the government to extend its export support policies to sustain the momentum.

"The downward trend in exports and imports finally halted thanks to the efforts by the government to stabilize external sales," said Xue Jun, an analyst at Changjiang Securities Co. "We expected it, but it's still very encouraging when it is confirmed by the official figures."

China's exports fell 21.4 percent year on year to US$95.4 billion last month, softening from decreases of 26.4 percent in May -- which was a record low dating back at least 14 years -- and 22.6 percent in April.

Imports dropped 13.2 percent to US$87.2 billion in June on an annual basis, improving from the reductions of 25.2 percent in May and 23 percent in April.

The figures put the monthly trade surplus at US$8.2 billion, down from US$13.4 billion in May, the General Administration of Customs said yesterday.

"The stabilizing exports provide a solid foundation for China's economic recovery. However, the one-time improvement is not yet evidence of an absolute turnaround. The government should be careful of fluctuations and continue to aid exporters," Xue said.

China's Purchasing Managers Index, which is an indicator of economic outlook that measures manufacturing activities, provided clues earlier of the slowing decrease in trade.

The PMI's index for new export orders strengthened to 51.4 in June, following a 50.1 reading in May when it entered positive territory for the first time since June last year. Readings over 50 indicate expansion.

Other economists also were optimistic over the latest trade figures.

Wang Qing, a Morgan Stanley economist, said the "green shoots" of economic recovery have sprouted and are likely to blossom in the second half of this year.

"The trade growth may continue as the government is lending a helping hand to exporters," Wang said. "Together with the continued implementation of the fiscal stimulus package, we should see robust growth in GDP in the second half."

China's gross domestic product expanded 6.1 percent in the first quarter, the weakest growth in at least 17 years. Some economists expect the economy to advance by around 8 percent in the second quarter. The figure is set to be released next week.

To help its struggling exporters, China reduced or removed export taxes on nearly 100 types of goods including some agricultural products and fertilizers starting this month. It also has raised tax rebates seven times since August last year.

In June, the European Union remained China's largest trading partner with bilateral sales of US$30.7 billion, up from the US$26.8 billion a month earlier, though the growth contracted 20.9 percent from a year ago.

The EU was followed by the United States and Japan with trade values of US$23.8 billion and US$19.3 billion, down 16.6 percent and 23.1 percent from a year earlier respectively.


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