China Imports, Exports Accelerate in May

(Beijing) — China’s exports and imports increased at a quicker rate in May than in the previous month, data from the country’s customs authority showed Thursday, as strong foreign demand stoked vigorous activity at domestic factories.

Exports rose 8.7% last month from a year ago to $191.0 billion, according to figures published by the General Administration of Customs. That was up from a gain of 8.0% in April and it beat a median forecast of a 7.6% growth in a Caixin poll of 10 economists.

Imports jumped 14.8% year-on-year in May to $150.2 billion, customs data showed. That was higher than April’s rise of 11.9% and well ahead of a median estimate of an increase of 9.5% in the survey.

China held $40.8 billion in a trade surplus last month, compared with $44.8 billion in the same month in 2016.

Exports, underpinned by continued improvement in global trade, picked up more in real terms than in being inflated by price increases. That in turn boosted China’s demand for supplies such as energy and raw materials, analysts said.

“Imports were largely driven by demand from exporters… rather than domestic demand” of end consumption, Claire Huang, an economist with Societe Generale in Hong Kong, told Caixin.

Brian Jackson, an analyst with research firm IHS Markit, noted in a report that accelerated growth in imports of mechanical and electrical goods and high-technology products was “indicative of great demand from China’s upstream Asian supply-chain partners.”

Exports were mainly bolstered by purchases from the United States and the European Union. Sales to Japan and the 10-member Association of Southeast Asian Nations slowed modestly, customs data showed.

Shipments to the U.S. climbed 11.7% year-on-year in May, slightly higher than 11.5% in the previous month. Growth in exports to the E.U. accelerated to 9.5% last month from 4.4% in April, according to a Caixin calculation based on customs figures.

“The further pickup in growth of exports to the U.S. and EU increases the likelihood that the current global trade improvement is sustainable,” Louis Kuijs, a Hong Kong-based economist with Oxford Economics, wrote in a report.

While solid recovery in the developed markets is expected to support China’s exports in coming months, analysts are rather pessimistic about the prospects of imports because domestic demand is likely to be slack due to the Chinese government’s measures to crack down on property speculation and reduce credit risk in the country’s financial system, which has led to a spike in market interest rates.

“We are still expecting China’s domestic demand momentum to cool amid weaker real-estate activity and less accommodative-monetary policy,” said Kuijs.

“This will weigh on imports in the rest of 2017, especially as year-on-year commodity price increases will also continue to moderate after the earlier spurt.”

China’s economic growth has shown signs of cooling in recent months after rebounding for the last two quarters.

For example, the country’s manufacturing activity contracted for the first time in 11 months in May, an industry survey sponsored by Caixin found, while the official manufacturing purchasing managers’ index stayed in line with April’s six-month low last month.

Contact reporter Fran Wang (fangwang@caixin.com)