BEIJING (Reuters) - China's surprisingly buoyant exports in July pushed its trade surplus to a record, but a drop in imports signals sluggish domestic demand that will likely call for continuing policy support to keep economic growth on track.
Manufacturing appears to have picked up in the world's second-largest economy but unexpected weakness in the services sector has renewed concerns about the country's growth outlook. The weak housing market remains China's biggest risk, posing a drag on the broader economy and investor confidence.
Exports in July jumped 14.5 percent from a year earlier, the General Administration of Customs said on Friday, doubling from 7.2 percent in June and roundly beating market expectations.
Imports fell 1.6 percent, versus a rise of 5.5 percent in June, leaving the country with a record trade surplus of $47.3 billion (28.14 billion pounds) for the month.
A Reuters poll had predicted a 7.5 percent rise in exports, a 3 percent increase in imports and a trade surplus of $27 billion.
"The (export) data indicates very strong demand externally and less need for a weak currency," said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong.
"However, imports contracted 1.6 percent year-on-year, indicating soft domestic demand and a downward pressure on growth. Policymakers are likely to do more to support the domestic economy."
Financial markets firmed on the data with the Shanghai Composite Index (SSEC:) rebounding. It rose 0.25 percent by midday from its intraday low, when it was down 0.32 percent.
After a weak start this year, China's exports have shown signs of improvement helped by stronger global growth as well as supportive domestic policies and the effects of a weaker yuan.
But imports have been weak, although recent data has pointed to some signs of stabilisation as a raft of government stimulus measures start to kick in.
Combined exports and imports grew 2 percent in the first seven months from a year earlier, trailing far behind the government's full-year target of 7.5 percent.
Annual economic growth quickened modestly to 7.5 percent in the second quarter from 7.4 percent in the previous three months, but analysts caution that a cooling property market could drag on growth even as global demand improves.
The government has unveiled a burst of "targeted" policy stimulus since April, including cutting reserve requirements for some banks, hastening construction of railways and public housing and allowing local governments to loosen property curbs.
Chinese leaders have pledged to maintain pro-growth policies to help achieve the annual growth target of 7.5 percent.
The Politburo, a top decision-making body of the ruling Communist Party, said last month that China must maintain a "certain speed" in its development over the long term to help resolve problems in the economy
The government is due to release inflation data on Saturday, and industrial output, retail sales and fixed-asset investment on Aug. 13. New loan and money supply data will be issued between Aug. 10-15.
(Reporting by China economics team; Editing by Jacqueline Wong)