China's exports fall 7.5% in May, adding to stimulus talk

AFP , Wednesday 7 Jun 2023

China's exports fell in May for the first time since February, data showed Wednesday, breaking a two-month growth streak as a post-Covid rebound faded and adding to speculation that officials will unveil fresh stimulus measures.

Driverless trucks move shipping containers at an automated port in Tianjin, China, Monday, Jan. 16, 2023. AP


Rising global inflation, the threat of recession elsewhere and geopolitical tensions with the United States have weakened demand for Chinese products.

That resulted in overseas shipments sinking 7.5 percent on-year last month, Customs figures showed, marking a sharp drop from an increase of 8.5 percent in April and much steeper than the 1.8 percent forecast in a Bloomberg survey.

But exports to Russia rose 75.6 percent in May, the highest rate since Moscow invaded Ukraine, even as trade with most major European markets and the United States fell.

Moscow and Beijing have held on to economic ties despite a raft of Western sanctions against Russia, with overall trade between the neighbours growing by 41.3 percent in April -- the highest since the war began.

China's exports grew in March and April, snapping a run of five straight declines, when production was disrupted by sweeping lockdowns and delays at ports when authorities enforced their strict zero-Covid policy.

And the Chinese economy expanded by 4.5 percent in the first quarter of the year.

But that recovery has lost steam, with the economy weighed down by a debt-laden property sector, limp consumer confidence and a global economic slowdown.

Meanwhile, imports fell 4.5 percent in May, a smaller decline than April's 7.9 percent contraction but better than the 8.0 percent estimate.

- 'Disappointing data' -

The data are the latest to highlight weaknesses in the world's number two economy, with manufacturing activity shrinking in May for the second successive month.

Reports said Wednesday that authorities have asked the country's biggest banks to lower their deposit rates in a bid to boost the economy.

Analysts said such a move could indicate the People's Bank of China was considering an interest rate cut as soon as this month.

The figures were "yet another disappointing data which will raise growth concerns and intensify expectations of more policy support", said Khoon Goh, at Australia & New Zealand Banking Group.

China is also grappling with a new Covid-19 outbreak, but official data on its scale is scarce and there is little sign that containment policies will be reimposed.

Senior health adviser Zhong Nanshan said the current wave may peak at around 65 million infections per week by the end of June, state-backed Shanghai media outlet The Paper reported last month.

The property sector, which along with construction accounts for about a quarter of China's GDP, experienced its "worst-ever slump" last year, according to Beijing-based economic consultancy Gavekal-Dragonomics.

To revive a struggling industry, the government has pivoted away from its crackdown on debt towards a more conciliatory approach since November, with targeted support measures for the most financially sound developers.

Ting Lu, Nomura's Chief China Economist, said in a note this week that analysts expected "more easing and stimulus measures".

"Amid the deteriorating property sector, its potentially devastating impact on government finance and the rising risk of double-dip, we do not expect Beijing to sit idle," Lu wrote.

May's trade data suggests "subdued global demand for Chinese goods and supports our view that the robust export figures of the previous couple of months reflected distortions to the customs data rather than a turnaround in foreign demand", Capital Economics analysts wrote in a note on Wednesday.

"We think exports will fall further before bottoming out later this year."

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