Imports in China witnessed a rise in June for the first time since the beginning of the economic crisis that accompanied the onset of the COVID-19 pandemic. Buoyed by the demand for medical supplies, exports also rose, serving as an indicator of the economy's recovery. The country's imports rose by 2.7 percent in June according to customs data, which was in opposition to market expectations of a 10 percent drop.

The Chinese government has rolled out comprehensive economic stimulus to aid in the increase of domestic demand, in spite of the global resurgence of the coronavirus infection has cast doubts over the possibility of recovery of global economic activity. Imports had fallen by 16.7 percent last month.

A Rise in Exports

Exports also rose unexpectedly, up 0.5 percent, suggesting global demand is starting to pick up again as many countries begin to ease tough anti-virus measures that have pushed the world's economy into its biggest slump in almost 90 years. Analyst had estimated a 1.5 percent drop following a 3.3 percent decline in May.

Map of China
Map of China (Representational Picture) Wikimedia Commons

"The significant improvement in China's imports is an indication of the country's accelerating economic recovery, which has been mainly driven by substantial increases in investments in sectors such as real estate and infrastructure," said Boyang Xue, a China analyst at consultancy firm DuckerFrontier.

Indeed, iron ore imports jumped to the highest in 33 months in June, the trade data showed, fuelled by rising shipments from miners and robust demand. Crude oil imports also hit an all-time high amid bargain hunting by Chinese refiners as oil prices collapsed.

Martin Rasmussen, China economist at Capital Economics, expects China's imports will continue to improve as a ramp-up in fiscal stimulus boosts domestic demand. China's imports from the United States rose 11.3 percent in June, reversing a double-digit declining trend seen after the coronavirus outbreak.

"Faced with difficulties presented by the sudden epidemic, we're still honoring our commitments and implementing the (trade) agreement," customs spokesman Liu Kuiwen told reporters on Tuesday.

Worsening Ties With the US

US President Donald Trump said on Friday he was not thinking about negotiating a "Phase 2" trade deal with China as relations between Washington and Beijing have been "severely damaged" due to the coronavirus pandemic and other issues. China's trade surplus with the United States widened to $29.41 billion in June from $27.89 billion in May.

US China flag
US China flags Reuters

China's economy is recovering from a sharp 6.8 percent contraction in the first quarter, but the recovery remains fragile as global demand falters due to social restrictions and still rising coronavirus cases. Chinese consumption is also subdued amid job losses and concerns about a second wave of infections.

The country's export performance however has not been as severely affected by the global slowdown as some analysts had feared, supported by shipments of face masks, personal protective equipment and computers.

"The reopening of major western economies and elevated overseas demand for PPEs and masks supported Chinese exports in June," said Xue from DuckerFrontier. "In addition, production disruptions in China's trade competitors also helped to shift some orders to Chinese exporters."

Western Economies Struggle

Despite the partial reopening of Western economies in the past few weeks, some countries are reimposing various lockdown measures to battle a resurgence in coronavirus cases.

"Looking ahead, the boost from shipments of masks, medical products and work-from-home equipment, which are still growing at over 30 percent y/y, will continue to fade and weigh on exports," said Rasmussen from Capital Economics, adding that exports would start to contract again before long.

Worsening US-China relations, shrinking global demand and disruptions in supply chains are also likely to pressure the trade outlook over the long run, Institute of Advanced Research at Shanghai University of Finance and Economics said in a report on Saturday. The country's trade surplus for June stood at $46.42 billion, compared with a surplus of $62.93 billion in May.

(With inputs from agencies)