China June import of lower growth in 20 months

An employee to work at the clothing of Lianfa of Yiwu Yiwu plant, Zhejiang province, June 8, 2011.

Credit: Reuters/Carlos BarriaBy Kevin Yao and Xu Wan

BEIJING. Sun July 10, 2011 5 pm EDT

BEIJING (Reuters) - import growth fall China clearly in its slower rate in 20 months in June in a further proof of the broad impact of monetary tightening on the economy, while a large trade surplus has suggested that capital remain a challenge for the authorities.

The sharp decline in growth in June imports, which fell at an annual rate of 19.3% to 28.4% in May, is related to the concerns of the investor on how quickly the world's second economy slows.

But, one day after data showed June inflation reached a peak of 3 years, analysts took the jump in the trade surplus as a sign that China may have to raise rates further, to rein in prices and to combat the influx of capital.

"The trade surplus rose in June," said Liu Li-Gang, an economist with ANZ. "Us would interpret this means moderation of export and import growth is not large enough to prevent the Government tighten still."

"The large trade surplus means that PBOC will continue to experience of large capital inflows." "It will have this problem of inflow, it is unlikely that they will pause during monetary policy".

A series of indicators in recent weeks have pointed to a moderation in the pace intoxicating investigations Manager of the new controls the export of Taiwan to the Mainland of the growth of China, the purchase.

Bank of China has yet clearly inflation remains a political priority. Most analysts agree that growth resulting from this policy mix will be slower that double-digit rate close to the course of the last few years, but it is little risk of a forced landing.

The Government is due to announce second-quarter economic growth data on Wednesday.

"Imports were below expectations," said David Cohen, Economist at the economy of the Action at Singapore. "We are seeing perhaps a reflection of the loss of momentum to the growth of China." After all, he has led a tightening of policy.

"The numbers are consistent with the slowdown in growth, with the soft landing that many people are looking for."

Last week, the Central Bank raised the interest rate for the third time this year, underlying the confidence of the Government in the economy's capacity to cope with a more restrictive monetary policy.

Sunday data showed June exports rose 17.9% a year ago, slowing a rise of 19.4% in May and pointing to the weakness of overseas demand saw exports and soften new commands in most of Asia.

Exports reached a record of 162 billion in June, while imports for the month were $ 139.7 billion. Who left the country with a trade surplus of 22.3 billion in June, compared to 13.1 billion in May.

The median forecast of economists surveyed by Reuters had exports increase imports increase of 25.0%, resulting in a trade surplus of $ 16.3 billion and 18.7%.

On a basis adjusted to the calendar, expanded exports 16.4% in June of the previous year, while imports jumped 19.2%, said Customs Agency.

Exports rose 3.1 percent in June from may, while imports fell by 3 per cent the month. On a basis adjusted to the calendar, June exports reached 4.2% in may, while imports fell by 2.6% in May.

ENTRANCE TO BREAK POLICY?

China's inflation data have become his most closely watched indicator in recent months as investors look for signs that Beijing is about to change his political position after nine months of constant tightening.

This index for June rose 6.4% a year earlier, slightly above the forecasts of economists for a 6.3% increase, with sharp Monte saved in food, consumer goods and property.

What is worrying, there are signs that proliferated and may persist even if world commodity prices continue to decline in inflationary pressures. The prices of products non-food rose 3 percent in their largest jump since the beginning of the records in 2002.

Analysts are concerned that record prices of pork, a key factor in food inflation in China in recent months, are also likely to facilitate soon - an opinion shared by pork due to a shortage of pork producers.

China has raised rates five times since October, alongside nine increases the ratio of reserve requirement for banks. Many economists believe that Beijing has already fired shot preventive inflation and is near the end of the hardening of the policy.

Indeed, China's stock market has increased and swaps on Earth were priced too more and more in chances reaching rate policy.

A slim majority of analysts interviewed by Reuters this week think that China could raise rates again this year before pat permanent until June 2012.

REBALANCING

At the same time, Beijing has repeatedly promised to restructure its economy to reduce its dependence on exports and investment and the promotion of domestic consumption in their place. As a result, growth in imports has become a bellwether for the strength of Chinese demand.

A slowdown in the growth of exports from China had been planned in response to the slowdown in the US economy and growth in Asia and Europe factory slid to last down in June.

"For the second half of the year, we plan to continue to fall because of the impact of the crisis of European debt, earthquake of the Japan and other factors, the exports", said Tang Jianwei, Economist at the Bank of Communications Shanghai.

The June surplus was the highest in seven months. China trade surpluses have fueled criticism of the partners key commercial who accuse Beijing to give its exporters an unfair boost with a currency many walks.

Despite the more recent data, the surplus commercial from China is on track close to a third consecutive year of 183 billion last year that the Government is trying to rebalance the economy for domestic consumption, based on exports of cut.

"The trade surplus will be maintained in the second half of the year, but domestic demand is still relatively strong." "If we expect a surplus for the year of $ 100 billion," said Tang.

(Other reports by Zhang Shengnan;) (Editing by Ken wills and Vidya Ranganathan)