2nd LD-Writethru: China Focus: Q3 trade growth rebounds, pressure remains

China's trade growth rebounded in the third quarter of this year thanks to policy support and a stabilizing economy, but is still facing complex domestic and global challenges.

Foreign trade in the first three quarters was down 1.9 percent from a year earlier to reach 17.53 trillion yuan (2.61 trillion U.S.dollars), with exports dropping 1.6 percent and imports falling 2.3 percent,according to figures from the General Administration of Customs (GAC) on Thursday.

In breakdown, Q3 trade showed signs of stabilization with exports and imports gaining growth of 0.4 percent and 2.1 percent, while those in the previous two quarters both recorded falls.

China's trade slowdown appears to be bottoming out, said Huang Songping, spokesperson with GAC, citing the effects of previous supportive policies, improving market sentiment and rising imports demands thanks to growing economic activities.

Foreign trade with countries included in the China-proposed Belt and Road initiative posted strong growth momentum during the January-September period, with trade with Pakistan, Russia, Poland, Bangladesh and India climbing 14.9 percent, 14 percent, 11.7 percent, 9.6 percent and 7.8 percent, respectively, year on year, GAC data showed.

This is mainly due to increasing economic and trade cooperation between China and countries along the Belt and Road, and China would continue to enhance customs collaboration to promote regional trade facilitation, Huang said.

Despite positive growth signs, Huang pointed out that the foundation for sustainable trade rebound is not solid as China still faces complex domestic and international challenges that might undermine trade growth for some time.

World trade will grow more slowly than expected in 2016, expanding by just 1.7 percent, well below the April forecast of 2.8 percent and recording the slowest pace of trade growth since the financial crisis of 2009, according to the latest WTO estimates.

The country's September trade data missed market expectations. Exports measured in yuan terms fell 5.6 percent year on year, reversing a 5.9-percent rise in August while imports slowed from rising 10.8 percent last month to just 2.2 percent.

The fall in exports occurred despite favorable moves in China's exchange rate, which should have boosted competitiveness. The Chinese currency has declined 0.8 percent against the U.S.dollar since its Oct.1 inclusion in the IMF's SDR basket, breaking through the critical 6.7 threshold.

Chinese yuan depreciation might benefit domestic exporters, but would also raise their imports costs of production materials as processing trade still remained a major part of of China's trade pattern, Huang said.

Huang also pointed out rising protectionism has added to the headwinds,as China suffered 85 trade remedy investigations worth 10.3 billion U.S.dollars from 20 countries and regions in the past eight months.

Trade is a somewhat volatile series and so numbers for individual months need to be treated with caution as a sign of trend, Bloomberg Chief Asia Economist Tom Orlik pointed out in a research note, adding that a higher base for comparison might weight on the September growth data.

Export order readings in both the National Bureau of Statistics and the Caixin PMIs for September are just slightly above 50, pointing to a modest recovery in external demand.

China did not specify a trade growth target for 2016. The government would continue to implement supportive polices to cut red tapes and reduce costs for trade firms in the next three months to stabilize trade growth, Huang said. Endi