- Exports rise to $308 billion, the most since January
- Imports also rise, but the gain isn’t as fast as for exports
Bloomberg News June 9, 2022
China’s exports rebounded in May as Covid-related bottlenecks on production and logistics clear up, but a slowdown looms this year as global consumer demand for goods cools, weakening trade’s ability to act as a driver for economic growth.
Exports in dollar terms grew 16.9% in May from a year earlier, customs data showed Thursday, accelerating from April’s 3.9% increase and climbing well above an 8% gain projected by economists. Imports rose 4.1% after staying unchanged in the previous month. Economists had expected a 2.8% increase.
While Chinese and South Korea exports show that demand remained solid in May, exporters are reporting a drop in orders as consumers around the world start moving their spending to services instead of goods, darkening the outlook for China’s companies. Soaring inflation in the US and Europe means households are tightening their belts.
“We always thought China could quickly resolve supply chain disruptions — this is even better than our optimistic view on this point,” said Wei Yao, head of research for Asia Pacific and chief economist at Societe Generale SA. “The question from here onwards is demand — western consumers continue to shift from goods to services and are increasingly pressured by inflation. External demand will probably soften from here, which means the recovery of domestic demand will be even more important but challenging given Zero Covid.”
China’s exports surged 30% in 2021, providing support for the economy as it contended with a property market slump and small Covid outbreaks. By comparison, this year exports are expected to contribute far less to growth, complicating the picture for an economy already under tremendous strain. This year, gross domestic product is forecast to grow at the slowest pace in decades as real estate continues to drag and the government’s zero tolerance Covid policy crimps activity.
“Exports may still contribute positively to economic growth, but by a much smaller margin than last year,” said Betty Wang, senior China economist at Australia & New Zealand Banking Group Ltd. She expects the contribution to be lower than 1 percentage point.
The trade surplus in the month widened to $78.8 billion from $51.1 billion, with exports worth $308.25 billion, the most in four months. The data reflects an improvement in trade following an easing of virus outbreaks and a partial recovery in operations at factories and the world’s largest port in Shanghai. Even so, logistics remained backed up, which may have kept shipments from growing even faster.
The dwell time for ships carrying exports from the port has also increased over the past week and remains up 61% compared to March 12, before the lockdown, according to the latest data from logistics information provider Fourkites. That suggests that the port is potentially struggling to keep up with export demand as it returns to normal.
China’s economy stands to get some support from a spurt in exports. A recovery in transport capacity cleared the way for a sharp acceleration in May’s shipments, which topped forecasts. The rebound is likely to extend into June and July, alongside Shanghai’s reopening. But it won’t last long — Covid-zero restrictions, weakening external demand and a higher year-earlier base will cut into export growth further out.David Qu, China economist
China’s exports to the US in the first five months in yuan terms grew 12.9% on year, and imports rose 2.1%. The trade surplus with the US widened to 1.02 trillion yuan ($153 billion) during the period, according to a statement. The import volumes of iron ore, soy beans, natural gas, and crude oil all fell in the first five months of this year compared to the same period last year.
Wang Shouwen, vice commerce minister, also warned of a number of uncertainties for trade. At a briefing on Wednesday, he highlighted a fragile global economic recovery, high inflation internationally, and logistics bottlenecks within China as potential threats. Even so, Wang said he was confident that China could keep foreign trade growth stable.
Also on Wednesday, Premier Li Keqiang led a State Council meeting calling for further support of foreign trade and investment, saying it matters to overall growth and employment, according to a report in Xinhua. He urged improvements in the efficiency of port loading and unloading, and transshipment and customs clearance. He also called on maintaining the stability of supply chains, and resolving difficulties so that foreign businesses can resume operations.
Also uncertain is whether the US would consider rolling back any of the tariffs imposed on Chinese goods under former President Donald Trump. US Treasury Secretary Janet Yellen told lawmakers Wednesday that the Biden administration is looking to “reconfigure” those levies, though she wouldn’t give a timeline beyond saying changes may come in the “coming weeks.”
Chinese commerce ministry spokeswoman Shu Jueting on Thursday said removing all additional tariffs on Chinese goods would benefit China, the US and the world amid high global inflation, reiterating the country’s stance.
“There’s been a lot of talks about the tariffs but it would be overly optimistic to expect any decision to be made soon,” ANZ’s Wang said, adding that it was unlikely the US would remove all China-related tariffs.
— With assistance by John Liu, Lin Zhu, Fran Wang, and Ann Koh