The ZIM Integrated Shipping Services Ltd. Chicago container ship sails out of the Yangshan Deepwater Port in this aerial photograph taken in Shanghai, China, on Monday, March 23, 2020.
Qilai Shen | Bloomberg | Getty Images
China’s exports contracted in May as global coronavirus lockdowns continued to devastate demand, while a sharper-than-expected fall in imports pointed to mounting pressure on manufacturers as global growth stalls.
The somber trade readings for the world’s second-biggest economy could pile pressure on policymakers to roll out more support for a sector that is critical to the livelihoods of more than 180 million workers. Total trade accounts for about a third of the economy.
Overseas shipments in May fell 3.3% from a year earlier, after a surprising 3.5% gain in April, customs data showed on Sunday. That compared with a 7% drop forecast in a Reuters poll.
While exports fared slightly better than expected, imports tumbled 16.7% compared with a year earlier, worsening from a 14.2% decline the previous month and marking the sharpest decline since January 2016.
It had been expected to fall 9.7% in May. “Exports benefited from the ASEAN (Association of Southeast Asian Nations) market and exchange rate depreciation, while imports were affected by insufficient domestic demand and commodity price declines,” said Wang Jun, chief economist of Zhongyuan Bank.
As a result, China posted a record trade surplus of $62.93 billion last month, the highest since Reuters started tracking the series in 1981, compared with the poll’s forecast for a $39 billion surplus and $45.34 billion surplus in April.
China’s trade surplus with the United States widened to $27.89 billion in May, Reuters calculation based on customs data showed.
This comes as Sino-U.S. tensions are again on the rise, though sources say President Donald Trump has little choice but to stick with a Phase 1 trade deal for now.
Export headwinds
Both official and private factory surveys for May showed sub-indexes for export orders remained deep in contraction. Profits at China’s industrial firms fell almost 30% in the January-April period.
Analysts said bright spots like exports of medical supplies, of which China has dominated the supply chain, masked the strong headwinds faced by exporters stuck with unsold stock and cancelled orders from abroad.
In the first half of May, China shipped 63.2 billion yuan of medical supplies, Reuters calculations from customs data showed, compared with 71.2 billion yuan in the March-April period.
“Even though the export performance exceeded expectations, the difficulties faced by traditional trade enterprises should not be ignored,” said Zhang Yi, chief economist at Zhonghai Shengrong Capital Management.
Highlighting the uncertain outlook, the Chinese government said in late May it was not setting an annual growth target, for the first time since 2002, reflecting a cautious stance on policy easing, although some expect domestic demand to bounce back somewhat, while export conditions remain unpredictable.
The economy shrank 6.8% in the first quarter from a year earlier. “In the future exports will basically see negative growth, but it is not necessary to be too pessimistic. It should be within -10%,” Zhang said.
“Imports are subject to greater uncertainty, depending on the recovery of domestic market demand and the implementation of the Phase 1 agreement between China and the United States,” he said.
