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China's May exports gain steam but imports fall unexpectedly

Date 10-June-2014
Subject China's May exports gain steam but imports fall unexpectedly

China : China’s exports gained steam in May, thanks to firmer global demand, data showed on June 8. However, an unexpected fall in imports signaled weaker domestic demand that could continue to weigh on the world's second-largest economy. Exports rose seven per cent in May from a year earlier, quickening from April's 0.9 per cent rise, while imports fell 1.6 per cent, versus a rise of 0.8 per cent in April, the General Administration of Customs said.

China's trade surplus widened sharply to $35.9 billion in May from April's $18.5 billion, the customs office said. That compared with market expectations in a Reuters poll of a 6.6 per cent rise in exports, a 6.1 per cent rise in imports and a monthly trade surplus of $22.6 billion.

"We do not think the May trade data will change the policy stance significantly," Louis Kuijs, an RBS economist in Hong Kong, said .

"While the export data are reasonably positive, the weakness of domestic demand implied by the import data may keep the pressure up for initiatives to support growth," he said. China's commerce ministry had predicted the trade picture could brighten in May, as base efforts fade and Government support measures kick in. 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 currency restrictions. Authorities have cracked down on such activities since May of last year. Exports to the United States rose 6.3 per cent in May, slowing from a rise of 12 per cent in April, while shipments to the European Union rose 13.4 per cent last month, compared with 15.1 per cent in April. Exports to Asean countries rose 9.1 per cent, quickening from 3.8 per cent in April, data showed.

The Government has also unveiled some policy support for the export sector, including giving more tax breaks, credit insurance and currency hedging options to its exporters. Last month, a senior commerce ministry official suggested 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 had been one of the economy's main engines.

China's combined exports and imports edged up 0.2 percent in the first five months from a year earlier, trailing far behind the annual growth target of 7.5 per cent.

Analysts believe that China's property market could put downward pressure on growth even as global demand improves, as evidence mounts of a rapid cooling in what had been one of the few strong spots in the economy.

A Reuters poll found analysts expect annual economic growth to slow to 7.3 per cent in the second quarter from 7.4 per cent in the previous quarter, with full-year growth of 7.3 per cent in 2014, the weakest in 24 years and below the Government target of 7.5 per cent.

Premier Li Keqiang said that the economy still faced relatively big downward pressures and pledged to continue to use targeted measures to support growth.

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