(Yicai Global) Aug. 9 -- China’s trade surplus unexpectedly rose 3.4 percent to a new record in July from a month earlier, exceeding USD100 billion for the first time, as shipments of new energy vehicles lifted exports. But the outlook is less rosy as overseas demand could wane under the combined weight of higher inflation and interest rates abroad.

China’s trade surplus was USD101.3 billion last month, according to customs data. That compared with the average prediction for a 15.5 percent drop to USD82.8 billion made by 17 chief economists polled by Yicai Global. In US dollar terms, exports jumped 18 percent from a year earlier, the steepest increase this year.

Much of the boost comes from vehicles. Auto and car chassis exports surged 64 percent from a year ago, the most since February. Shipments of car parts jumped almost 27 percent, the most since last August.

Other areas softened, including those related to lifestyle changes amid the pandemic. The increase in exports of electronic devices for home-working slowed to 2.7 percent in July from 9 percent in the prior month. Mobile phone shipments sank 10.2 percent from a year ago, while home appliances dropped 8.2 percent.

Looking ahead, overseas demand may come under great pressure in the second half as foreign central banks tighten monetary policy, according to Xie Yunliang, chief macro analyst at Cinda Securities.

If purchasing managers' indexes in China’s major trading partners fall this month, the expansion of China's prosperity index may slow and continue to weigh on export growth, Xie said, adding that as prices are still relatively high, the slump in exports is expected to be limited this year.

The auto sector, especially electric vehicles, may be one of few industries that could boost China’s export growth, Lu Ting, chief China economist at Nomura, told Yicai Global.

China's auto industry is competitive, has huge production capacity, and complete supply chains, which can buffer the country's exports, especially now that inflation has hit passenger vehicle prices in developed economies over the past one and a half years, Lu said.

“The huge trade surplus will be a factor that boosts the yuan’s mid-term performance,” Zhang Meng, macro and foreign exchange strategist at Barclays, told Yicai Global. Financial institutions believe that the scope for a sharp weakening in the yuan is limited.

A trader at a Chinese state-owned bank said that against the backdrop of China’s economic recovery, the yuan’s depreciation has been smaller than the increase in the US Dollar Index since June. Going forward, the yuan’s decline is expected to be limited.

The US Dollar Index rose above the threshold of 108 last month, hitting a new high since October 2002. Over the past year, the dollar has strengthened by 18 percent against a basket of currencies. 

Editors: Liao Shumin, Emmi Laine