By Yawen Chen and Elias Glenn
BEIJING (Reuters) - China's imports unexpectedly rose in August for the first time in nearly two years, boosted by coal and other commodities, suggesting domestic demand may be picking up and putting the world's second-largest economy on a more balanced footing.
Exports also showed signs of improvement, falling by a less-than-expected 2.8 percent from a year earlier, as demand in the United States, Europe and even Japan showed some signs of improvement, data showed on Thursday.
If it proves sustainable, a trade recovery or even signs of trade stabilization would help ease fears that China's economy is becoming increasingly lopsided, and give feeble global growth a much-needed shot in the arm.
In recent months, China's economy has shown signs of stabilizing, but growth has become more dependant on a government infrastructure spending spree and a housing boom as private investment fizzles and exports remain sluggish.
"The improvement in imports is mostly a reflection of stronger domestic demand. Chinese companies are restocking (raw materials), and also are now expecting prices to start rising," said Wang Jianhui, an economist with Capital Securities in Beijing.
"There is also some expectation that the economy is improving. As we are entering the high season in the fourth quarter, we expect exports to stay stable and imports to improve as higher prices spread to more products."
China's 1.5 percent import rise was the first expansion in value terms since October 2014. Economists polled by Reuters had expected a fall of 4.9 percent, moderating from a sharp 12.5 percent tumble in July.
While a surge in commodity prices is widely acknowledged as a major factor for the rebound in imports, analysts believe the surprising uptick also reflected stronger domestic demand, which is fuelling a brighter profit outlook for Chinese manufacturers.
"The size of the pick-up suggests that there may also have been some improvement in import volumes last month," Capital Economics said in a note.
Non-commodity imports also rebounded, HSBC said in a note, noting gains in machinery imports.
The launch of new consumer electronic gadgets ahead of the year-end shopping season may also have given a boost to China's supply chain, as firms imported more components to make products such as Apple's iPhone 7, which officially launched this week.
A similar bounce in hi-tech was seen in Taiwan's export data on Wednesday, though analysts are skeptical it will last much beyond the seasonal Christmas peak.
"We think the rebound in domestic demand is a reflection of robust infrastructure investment over the past few months. This is the result of an expansionary fiscal policy, which we believe will continue into the second half of 2016, and possibly well into 2017," HSBC economists said.
COMMODITIES AND CARS
Among commodity imports, coal jumped over 50 percent by volume as China cut back on mining its own coal in favor of buying higher quality supplies from countries such as Australia.
While iron ore imports slipped from July they remained near record highs as Chinese steelmakers rebuild inventories in expectation of higher returns. Stockpiles at small- and medium-sized mills rose 7.5 percent from Aug. 11 to 25, Morgan Stanley said in a note.
The steel price surge is due in part to Beijing's efforts to reduce excess capacity.
Some Chinese steel plants are turning in the best margins in at least three years as prices rise and demand for building materials increases. Chinese steel exports also look set to hit a fresh record this year, raising friction with some of its major trading partners.
Passenger vehicle sales in China to retail customers rose 12.7 percent in January-August from a year earlier, the China Passenger Car Association said on Thursday. Imports of automobiles and auto parts also increased significantly in August, Nomura noted.
Global demand for Chinese goods also seems to be picking up slowly, though weak U.S. factory activity readings and German output data this week suggest export orders may remain sluggish.
Exports fell 2.8 percent from a year earlier, beating forecasts for a 4.0 percent decline. Shipments to the U.S. dipped marginally while those to the European Union rose 2.4 percent. Exports to Japan also improved, albeit modestly.
China's customs department said pressure on shipments was expected to ease further in the fourth quarter, though analysts doubt there will be any strong recovery soon.
China recorded a narrower trade surplus of $52.05 billion in August, versus a $58 billion forecast and July's $52.31 billion.
However, global demand still remains depressed. International Monetary Fund (IMF) Managing Director Christine Lagarde said earlier this month that it will likely downgrade its 2016 global growth forecast again.
China's cabinet said this week that it will step up proactive fiscal policy efforts now that commodity prices are relatively low, hinting that the infrastructure boom will continue. But some analysts said a housing rebound may be peaking as sharp price rises force more cities to tighten restrictions on home buyers.
(Reporting by Yawen Chen and Elias Glenn; Additional reporting by Zimu Li; Editing by Kim Coghill)