China posted a smaller-than-expected trade surplus in May of $13.1 billion because of soaring imports and weaker global demand growth, giving mixed signals about how the economy fared when some of its best export customers faltered. China’s sales to the United States and the European Union slumped to their weakest since late 2009, excluding Lunar New Year holidays, underlining the view that the world economy is stumbling.
Still, as an engine of growth, import figures suggested China’s economy is expanding at a healthy, if not stellar, pace. Crude imports stayed at elevated levels and coal volumes rose by more than a fifth from both April and a year earlier.
“The overall strength in imports suggests that China’s domestic demand has not slowed as much as the market may have feared,” said Wang Tao, an economist with UBS in Beijing. Exports rose 19.4 per cent in May compared to May last year. This was a huge decrease from export rate of 29.9 per cent in April. Meanwhile imports accelerated to 28.4 per cent from 21.8 per cent in April, the customs agency said on Friday.
China’s trade surplus rose from $11.4 billion in April to $18.6 billion.”The general message is neither weak nor strong,” said Ken Peng, an economist with Citigroup in Beijing. Indeed, the data offered a little something for everyone, which may explain why financial markets showed no significant reaction.
Trade data for China is always closely watched because it is the world’s biggest exporter and the second-biggest economy. May’s figures took on even greater significance as economists tried to gauge whether a slowdown in the world economy is the start of a more troubling slump.
Those who think the world economy will revive in the coming months could point to China’s stronger-than-expected imports as evidence that domestic demand remains healthy in a region that is vital to global growth.
Those who worry that a protracted slowdown looms could find supporting evidence in the weaker-than-expected export figures. With inflation running above its comfort zone, Beijing has taken steps to cool the economy. Economists are monitoring the economy to see whether those inflation-fighting efforts can cool overheating areas such as property without smothering overall demand. Exports to the United States rose by a modest 7.2 percent from a year ago, well off the 25 percent growth pace in April. For the European Union, exports rose 13.2 percent, less than half the rate recorded in April.
Outside of the volatility caused by Lunar New Year holidays, both marked the weakest exports since November 2009, when the world economy was still feeling the aftermath of the global financial crisis.
Economists had widely expected export growth to slow after a series of manufacturing surveys showed weaker orders from most of China’s big trading partners. But the pace slowed a tad more than economists had predicted. On a seasonally adjusted basis, exports in May rose 16.6 percent from a year earlier but fell 4.4 percent from the previous month. Imports gained 23.1 percent year-on-year but were down 4.5 percent month-on-month. Chen Yong, an analyst at Huatai United Securities in Shanghai, said the pullback in May showed “there are still uncertainties hanging over the world recovery.” “The trade surplus in May is still at a relatively high level, which means there remains huge pressure for yuan appreciation,” Chen said. Chinese factory activity expanded in May at the slowest pace in at least nine months, two purchasing managers’ indexes showed earlier this month. Imports surged following a lacklustre showing in April. The data showed that crude imports topped five million barrels per day for a fifth consecutive month, although analysts suspected some of the shipments are destined for storage as China builds up its emergency reserves. It also indicated May coal arrivals rose 20.7 percent from the month before, evidence of China’s huge power demand. Power shortages have constrained growth, and utilities stepped up coal orders to prepare for summer demand.
For Wu Zhongjun, director for Yiwu Lianfa clothing factory in Zhejiang province, increased power supplies would ease at least one concern. He said his domestic business was fine but export orders had fallen by more than a third this year. “We have to deal with power cuts, rising wages, and also a labour shortage that has also been a national problem,” he said in an interview with Reuters.
