China's trade situation is likely to continue to improve in May as base effects fade and government support measures kick in, the customs office said on Friday, citing an official leading indicator.

China's exports and imports returned to slight growth in April as orders to the United States and European Union surged, offering some positive signals for the world's second-largest economy.

Analysts have attributed the weak trade figures partly to an inflated comparison base with last year due to a rash of fake invoicing of exports to beat foreign exchange restrictions.

The authorities have cracked down on such activities since May of last year.

"China's trade is still within a reasonable range after adjusting for the relatively higher comparison base," said Huang Guohua, a senior customs official, said in a webcast carried on the agency's website, www.customs.gov.cn.

"China's exports and imports will entered a stable phase of moderate growth as the (base) factor weakens, coupled with the implementation of recent measures introduced by the State Council and various departments to support trade," he said.

China's leading indicator on trade edged up 0.2 points in April from March to 41.9, Huang added.

Still, a senior commerce ministry official suggested on Tuesday that China could miss its target for trade growth for a third consecutive year in 2014 as higher labour costs and weaker global demand hurt what has been one of the economy's main engines.

The government has a target of 7.5 per cent growth in exports and imports this year. After a soft start to 2014, the ministry said combined exports and imports need to grow by an average annual rate of 11.3 per cent each month from May to December.

China's factory sector turned in its best performance in five months in May, a preliminary HSBC survey showed on Thursday, though overall manufacturing growth still contracted slightly in a suggestion that the outlook remains murky.

A breakdown of the survey results showed the handful of closely-followed indices that measure output, domestic and foreign demand all improved substantially in May to rise above the 50-point mark, from sub-50 levels in April.

New export orders, a proxy for foreign demand, showed the biggest turnaround. The index climbed to a level not seen in nearly 3-1/2-years.

Reuters

 

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