China's imports leapt in August, boding well for a strengthening of domestic demand in an economy that has become a major driver of global growth.
The unexpectedly big increase in imports also dented China's politically contentious trade surplus ahead of US Congressional hearings next week on whether to punish Beijing for what many in Washington see as an unfairly undervalued yuan.
Wang Hu, an economist with Guotai & Junan Securities in Shanghai, said the import figures along with robust car sales data suggested that China's economy had touched bottom in August.
"As European and US economic growth has slowed since the second quarter, China may again lead the global recovery," Wang said.
Imports jumped 35.2 per cent in August compared with a year earlier, easily beating July's 22.7 per cent rise and market forecasts of a 26.1 per cent increase, the General Administration of Customs said on Friday.
Annual export growth slowed to 34.4 per cent in August from 38.1 per cent in July but was close to expectations of a 35.0 per cent rise.
That left China with a trade surplus of $US20.0 billion, still eye-popping but down from $US28.7 billion in July and well below the median forecast of $US27.1 billion.
Economic growth had slowed over the first half of the year in response to government steps to rein in bank lending, deter property speculation and close obsolete, energy-guzzling plants in sectors such as steel and cement.
Such heavy industries have been running down their inventories, further dampening growth, but the import figures suggest this trend was petering out somewhat, said Qian Wang, an economist with J.P. Morgan in Hong Kong.
Yuan under scrutiny
Financial markets were unimpressed by the resilience shown by China, which by some estimates has already overtaken Japan as the world's second-largest economy.
China's export performance indicates global demand remains strong, for now, but investors remain worried about a sharp slowdown in the United States and anaemic growth in much of Europe.
Asian stocks outside Japan were flat after surrendering early gains, while the Australian dollar, which is sensitive to Chinese growth prospects, retreated from a four-month high. Shanghai stocks ended the morning 0.63 per cent lower.
Dong Xian'an, chief macroeconomist with Industrial Securities in Beijing, said the data implied a strong rebound in domestic demand.
"A possible reason is that China increased imports of raw materials in the last week of August driven by political pressure as well as low global commodity prices," he said.
U.S. lawmakers will hold hearings next week on whether to punish Beijing for what many in Washington see as an unfairly undervalued yuan
Larry Summers, President Barack Obama's chief economic adviser, visited Beijing this week for talks with President Hu Jintao and other high-ranking Chinese officials.
After the meetings, China and the United States both put an optimistic face on ties that have been jolted by economic and security tensions as well as disagreements over the yuan's exchange rate.
Coincidentally or not, the Chinese central bank let the yuan climb on Friday to its highest level since it was depegged from the dollar on June 19. Still, the yuan has gained less than 1 percent against the U.S. currency since then.
Moreover, China's rolling 12-month trade surplus widened in August to $US177.1 billion from $US172.8 billion, handing ammunition to critics who say the country is fixated on exports and is fueling unhealthy global economic imbalances.
"China's strong export growth and high trade surpluses weakens the argument that China cannot cope with currency appreciation, and should reinforce the case of those policymakers who argue that such a move would help address China's domestic policy challenges while also reducing the potential for trade tensions," Brian Jackson, an economist with Royal Bank of Canada in Hong Kong, said in a note.