Global recovery bodes well for China's trade

External markets have been getting better in the past months, an improvement boding well for the Chinese economy. It is expected that China's foreign trade will increase at a faster pace in the second half of the year, helping the country achieve its yearly economic growth target and avoid resorting to greater monetary loosening.

In the United States, China's largest single-country export market, signs are becoming more evident that the economic recovery is turning solid. After the cold weather reduced production and consumption in the beginning of the year, business activities turned active in the second quarter. Purchasing managers index, which gauges the manufacturing activities, hit 55.2, a remarkable increase from 52.7 in the first quarter.

Retail sales grew 4 percent year-on-year from March to May, outperforming 1.6 percent in the January-February period. Rising US consumption is especially a good sign for Chinese exports.

Business confidence in the US also went up, with a government survey showing 44 percent of CEOs expressing willingness to increase investment in the second half. The figure was higher than last year's average of 35 percent. Employment also recovered to the pre-financial crisis level.

All these showed solid improvements in the US economy.

Europe, another major Chinese export market, does not do as well as the US, but the continent is also on a weak recovery. Its consumption rose in the second quarter and the labor market improved slightly. The scenario points to a stable demand for Chinese products.

ASEAN economies see their growth bounce, with Indonesia, the Philippines, Thailand and Vietnam achieving better growth rate in the second quarter. Among them, Indonesia' consumer confidence index hit 95.1 in May, the highest level since 2005. ASEAN has gradually becomes an important export destination for China instead of just a raw material supplier to China. So economic recovery in Southeast Asia also bodes well for Chinese exports.

By comparison, Russia and Brazil are sluggish in economic growth. But considering the fact that the two countries are major commodity suppliers to China, slower growth there means China can have bigger opportunities to buy commodities at lower prices. This will help reduce production costs in China and help control inflation.

China's foreign trade in the second quarter actually improved than in the first. From the import figures of the country's major trading partners, demand from the US, the EU and Japan recovered visibly, while demand from ASEAN and emerging markets turned weak. But the overall situation is not bad.

According to Chinese Customs, China's foreign trade dropped 0.4 percent from January to May. But the decrease was based on high base built on the over-invoicing in the first half of last year. If this factor is ruled out, the real trade may have increased by 6 percent.

Looking ahead, the global recovery in the rest of the year will provide small impetus to China's trade. As the high-base factor diminishes in the second half of the year, it is highly likely net exports growth will help polish the GDP figure.

With trade performance stabilizing and more likely improving, the yearly economic growth target of 7.5 percent is well within reach.

That will help soothe the worries of excessive economic slowdown and boost policymakers' confidence to stay away from further stimulus measures.

It is highly likely that top policymakers will not resort to more monetary loosening in the second half of the year.

The author is a Shanghai-based analyst.