Economic Watch: China's May trade growth beats expectations

Source: Xinhua| 2017-06-08 18:15:21|Editor: Zhang Dongmiao
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BEIJING, June 8 (Xinhua) -- China's exports and imports surged in May, beating expectations, customs data showed Thursday.

Exports in yuan-denominated terms hit 1.32 trillion yuan (about 194 billion U.S. dollars) last month, up 15.5 percent year on year, higher than market expectations and the 14.3 percent growth in April, according to the General Administration of Customs (GAC).

Imports grew 22.1 percent in May, much faster than market forecasts and the 18.6 percent growth in April.

This led to a monthly trade surplus of 281.6 billion yuan, in contrast with a 262.3 billion yuan surplus in April. However, the May surplus declined 3.4 percent year on year.

Total foreign trade volume reached 2.35 trillion yuan last month, up 18.3 percent year on year.

May's data continued the growth in China's foreign trade since the beginning of the year.

In the first five months combined, exports increased 14.8 percent from a year ago to 5.88 trillion yuan, and imports jumped 26.5 percent to 4.88 trillion yuan, resulting in a 21.1 percent decline in the trade surplus.

During the first five months, trade with the EU jumped 16.1 percent from the same period last year to hit 1.6 trillion yuan. The EU is China's biggest trade partner, accounting for 14.8 percent of the country's foreign trade.

Meanwhile, trade with the United States, ASEAN and Japan increased by 21.1 percent, 23.2 percent and 17.5 percent, respectively.

Machinery, electronics and clothing exports rose in the first five months, while labor-intensive products such as fertilizer and steel saw shrinking orders.

A leading indicator for China's exports increased from 40.7 to 41.1 month on month in May, signaling positive export potential.

"Strong exports extend support to an economy showing signs of slowing momentum heading toward 2H," said Bloomberg chief Asia economist Tom Orlik.

Robust export growth in recent months is a marked improvement from a contraction during much of 2015 and 2016.

That raises hopes that exports may buffer the economy from a slowdown, as efforts at deleveraging and controls on real estate hit domestic demand, according to Tom.

For policymakers, as the trade-off between controlling risks and supporting growth has become significantly more pronounced, a tailwind from external demand offers relief, given the feared increase in protectionist pressure from the United States has not materialized and growth in Europe is surprisingly strong.

"This gives policymakers a little more room to leave tight policy settings in place, as they pursue deleveraging and yuan stability. It's also a buttress ahead of a likely Federal Reserve rate hike in mid-June," said Tom.

Tightening so far by China has been cautious and incremental -- using targeted instruments like reverse repos rather than benchmark rates, and moving in small 10 basis point steps rather than 25 basis points.

In Bloomberg Intelligence Economics' view, China's central bank will look to other instruments to secure its objectives.

Going forward, the export outlook is for sustained but unspectacular growth, according to Tom, as both the Caixin and National Bureau of Statistics purchasing managers' index data show export orders registering a fractional improvement.