It has been a bumpy ride for China's trade activities since the financial crisis broke out in late 2008. But export figures have rebounded strongly from the low level in early 2009 and the latest statistics give people more hope toward the second half of this year.

According to the State Administration of Customs, China's exports jumped 43.9 percent year-on-year (all on a year-on-year basis below unless otherwise specified) in June, far better than the market expectation. Exports in the first half grew about 35.2 percent, two percentage points higher than the rise of 33.2 percent in the first five months. Imports climbed 34.1 percent in June after surging 48.3 percent in May. The slowing of growth in exports and imports was mainly due to a rising comparison base. In fact, exports and imports in June were more than 10 percent higher than those a year ago, indicating the absolute values for both exports and imports have actually returned to above the 2008 levels. Due to the significant pick-up in exports, China's trade surplus climbed to $20 billion from $19.5 billion in May.

Market concerns about the impact of the euro zone debt crisis notwithstanding, China's exports to the European Union registered a high growth rate of 43.2 percent in June after rising 49.7 percent in May. Supported by the low comparison base and consecutive economic rebound, China's exports to the US rose 43.8 percent in June compared to the increase of 44.3 percent in May. By far, the country's exports to most regions have returned to above the normal level last seen in 2008.

Exports of most capital goods fared better than those of consumer goods, in line with the recent trend. I believe this will continue for the rest of the year due to the larger income elasticity and lower comparison base for capital goods. June exports of mechanical/electrical products and high-tech products both posted stellar growth rates of 41.8 percent and 38.4 percent, respectively, compared with the increases of 47.2 percent and 50.5 percent the month before. For the first half, exports in the above two categories returned to the highest monthly levels seen in 2008, up 35.9 percent and 40.9 percent, respectively.

Although imports of most commodities have maintained high growth rates lately (partially supported by the price factor), the volume growth has actually started to slow because of the tightening of domestic lending and the austerity measures in the property market. The import value of iron ore soared 75.1 percent in June from 70.1 percent in May, while the volume slid 14.7 percent after edging down 2.9 percent in May. Supported by strong auto sales, imports of crude oil in June soared 82.3 percent in value terms and 34.1 percent in volume, compared with a rise of 69.2 percent and 4.4 percent, respectively, in May.

June 2010 figures showed that the amounts of both exports and imports returned to above the highest monthly levels last seen in 2008. Due to the rising comparison base and a probable slowing of the global economic rebound, export growth is likely to gradually decrease in the second half. Based on our forecast, however, the year-on-year growth of exports can still reach around 27.2 percent and 11 percent, respectively, in the third and fourth quarters, while full-year growth should come in at about 25 percent. Meanwhile, as the contribution of the price factor to import growth is set to decline significantly, the import growth will probably decelerate in the second half.

The author is the executive director of BOCI Research Limited. The opinions expressed here are entirely his own and do not represent BOCI or any other affiliated companies within the group. Nothing in this article constitutes an investment recommendation.

(HK Edition 07/17/2010 page3)