BEIJING China's import growth unexpectedly fell for the second consecutive month in August, posting its worst performance in over a year and stoking speculation about whether authorities should loosen policy further to revive domestic demand.
Imports by the world's second-biggest economy fell 2.4 percent in August compared with a year ago, the General Administration of Customs said on Monday, missing a Reuters estimate for a 1.7 percent rise.
It was the second straight month that China's import growth was surprisingly weak, raising concerns that tepid domestic demand exacerbated by a cooling housing market is increasingly weighing on the economy.
In contrast, China's exports were surprisingly buoyant in August amid stronger global demand. They jumped 9.4 percent from a year earlier to beat a forecast rise of 8 percent, although the growth rate slowed from 14.5 percent in July.
That pushed the trade surplus to an unexpected all-time high of $49.8 billion, which could put further appreciation pressure on the yuan currency CNY=CFXS.
Although falling commodity prices have magnified the weakness in imports as China's trade data is measured in terms of value, analysts said Chinese demand also seemed to be fizzling.
"It's an interesting set of numbers for policymakers," said Louis Kuijs, an economist at RBS.
"It calls for more policy easing, but at the same time, strong exports and a record surplus will put some pressure on policymakers to let the currency rise in some way or the other."
China's economy has had a bumpy ride this year. Growth rebounded slightly in the second quarter from an 18-month low thanks to a stream of government stimulus measures, but hopes that the recovery would gain traction were dashed in July when data showed activity was stumbling again.
As a result, authorities have repeatedly warned that China may miss its target to grow its trade sector by 7.5 percent this year, even though they maintained that the broader economy can grow by around 7.5 percent in 2014.
Indeed, a breakdown of Monday's trade data showed Chinese exports slowed across most major markets, compared with July when growth hit a 15-month high.
Exports to the United States, the top buyer of Chinese exports, rose 11.4 percent from a year earlier, compared with July's 12.3 percent increase. Sales to Europe, where factory activity is faltering, cooled to 12.1 percent on an annual basis, from July's 17 percent.
In terms of imports, purchases from Europe - a major seller of goods and services to China - fell to a 14-month low of 4.5 percent from a year earlier.
Some analysts said the lacklustre data corroborated with figures seen elsewhere. Steel demand, for instance, has not rebounded despite a steep fall in iron ore prices, noted Mark Pervan, head of research at ANZ Bank.
"That's telling you that they are more cautious on short-term demand," Pervan said, referring to steel mills. "I think that's because of the direction of the housing market currently, which is moving downward."
China's trade sector is a major employer in the country even though it dragged on the economy last year - net exports subtracted 4.4 percent from gross domestic product.
The export sector was also surprisingly buoyant in July, helping the trade surplus to balloon to a then record of $47.3 billion. The upbeat performance was helped in part by a strengthening U.S. economy, China's top export destination.
But risks posed by the cooling property sector have dimmed any optimism brought on by perkier foreign demand.
The real estate sector, which accounts for about 15 percent of China's economic output, is experiencing its worst downturn in two years as sales and prices turn south.
The housing slump, combined with a startling drop in credit supply last month to a six-year low, has led many analysts to predict that China's leaders need to loosen policy further and offer more stimulus if they wish to grow the economy by the targeted 7.5 percent.
More analysts are calling for the central bank to cut banks' reserve requirement ratio nationwide, though the majority still feel that the central bank is not likely to cut interest rates.
"The trade data indicated downward pressure on China's economy," said Li Huiyong, an economist at Shenyin Wanguo in Shanghai. "Policymakers may need to enhance their efforts to support the domestic economy if industrial output growth slows to 8.6 percent or below in coming months."
August industrial output data later this week is expected to show a slowdown to 8.8 percent growth from 9.0 percent in July. Growth in retail sales and fixed-asset investment likely also cooled slightly.
With China's trade surplus expanding to record levels, some economists said the yuan could rise further, driven by stronger market demand, after hitting a near six-month high last week.
That could force China's central bank to decide whether it should let the yuan rise further at the cost of hurting Chinese exporters, or intervene in the foreign exchange market to temper the currency's strength.
The yuan is a lightning rod issue between China and its major trade partners including the United States, which accuse China of deliberately suppressing the currency to help its exporters.
China has always denied such accusations, even though its central bank is often seen by traders to be intervening in the currency market.
"The large trade surplus, plus the decent renminbi yields, will add appreciation pressure on the renminbi if the central bank does not intervene intensively in the market," ANZ economists said in a note on Monday.
(Reporting by Koh Gui Qing and Shao Xiaoyi; Editing by Kim Coghill)