Beijing is steering its super-loose monetary
and fiscal policies back to normal after a record surge in credit last year to
combat the global crisis. It has reined in lending to local authorities and
mounted a drive against property speculation.
Annual import growth moderated to 22.7
percent from 34.1 percent in June, well below forecasts of a 30 percent rise,
providing clear evidence that the measures are biting.
"We have carried out a proactive
adjustment of economic growth. With economic growth slowing down, import growth
is also easing," Huang Guohua, an official at the General Administration
of Customs, which released the data, told state television.
The disappointing figures, which partly
reflected a 4.5 percent fall in import prices in July, sent the main Shanghai
stock index tumbling 2.3 percent and weighed on shares in Hong Kong,
underlining investors' fears that the global economic recovery is losing
momentum.
"We expect import growth to slow
further for the rest of the year as the domestic economy is coming off the
boil," said Nie Wen, an analyst at Fortune Trust Co. in Shanghai.
Exports, by contrast, held up well in
July, rising 38.1 percent from a year earlier to a record high of $145.5
billion.
Growth was down from June's 43.9 percent
pace but exceeded projections of a 35.5 percent rise, partly because exporters
rushed to beat the July 15 removal of tax rebates on an array of steel and
other products.
The resulting trade surplus of $28.7
billion, the highest since January 2009, dwarfed forecasts of $19.0 billion as
well as June's $20.0 billion total.
Brian Jackson, a strategist at Royal
Bank of Canada in Hong Kong, noted that figures due out later this week were
likely to show a US trade deficit of more than $40 billion.
"This contrast in the trade
position of the two most important economies in the world will likely increase
the pressure from Washington for Beijing to allow further currency
appreciation, particularly in the lead-up to mid-term elections in November,"
he said in a note to clients.
The yuan has risen just 0.8 percent against
the dollar since Beijing scrapped a 23-month peg to the US currency on June 19
and reinstated a managed float.
The trade outlook for the rest of the
year is cloudy.
Yu Song and Helen Qiao, economists at
Goldman Sachs, detected signs that Chinese policy had started to loosen, which
they said should lend more support to domestic demand and import growth.
But most analysts do not expect the
government to relax yet a series of curbs imposed on the property market in
April.
Fearing that prices were feeding on
themselves and putting the cost of a flat beyond the reach of ordinary people,
Beijing increased downpayments and mortgage rates, made it tougher to buy
multiple homes and tightened financing for developers.
Figures on Tuesday showed the
restrictions appeared to be working, albeit slowly.
House prices in 70 cities across China
rose 10.3 percent in the year to July, down from 11.4 percent in the 12 months
to June and a peak in April of 12.8 percent, the National Bureau of Statistics
said.
But prices on the month were unchanged
in July, following a 0.1 percent drop in June.
Jinsong Du, an analyst at Credit Suisse
in Hong Kong, saw no need for fresh curbs but said prices in major cities still
had scope to fall another 20 percent by the end of the year.
"The government should be pleased
that prices are not rising on a monthly basis," Du said. "In the near
term, they will continue to strictly implement the measures they've already
announced."
As for exports, China's strong
performance mirrored resilience in July figures released by South Korea and
Taiwan, indicating that global demand remains strong for now despite worries
about the eurozone's debt mess.
But with the outlook for the United
States darkening, some economists expect year-on-year export growth to start to
fade, especially as the 2009 base of comparison becomes more demanding.
Ben Simpfendorfer, an economist with
Royal Bank of Scotland in Hong Kong, said annual growth could slow to 10
percent by December.
At the same time, historical patterns
suggest the trade surplus will grow in the second half of the year, possibly
reaching $30 billion by December, Simpfendorfer said.
Such a combination could militate
against the exchange-rate shifts needed to produce better-balanced trade.
"The two developments will only add
to Washington's insistence on a stronger yuan and Beijing's resistance,"
he said in a note.
