This robust export performance led China’s trade surplus to expand to $82.62billion, up from April’s $72.35billion
China’s exports in May saw a significant surge, growing at their fastest rate in over a year despite ongoing trade tensions, according to customs data released on Friday.
Exports leapt 7.6% in May from the same month last year, hitting $302.35billion and marking the quickest growth since April 2023. However, imports only rose by 1.8% to $219.73 billion, falling short of the estimated 4% growth.
The increase in exports is partially due to a lower base in the same period last year when exports dropped by 7.5%. In contrast, exports grew by just 1.5% in April compared with the same period last year, while April imports increased by 8.4%.
This robust export performance led China’s trade surplus to expand to $82.62billion, up from April’s $72.35billion. The growth in exports comes as China grapples with heightened trade tensions with the US and Europe. The US is increasing tariffs on Chinese-made electric cars, while Europe is contemplating imposing similar tariffs.
Zichun Huang of Capital Economics said in a report: “Foreign tariffs are unlikely to immediately threaten exports; if anything, they may boost exports at the margin as firms speed up shipments to front-run the duties.”
Huang also suggested that exports would be bolstered by a weaker real effective exchange rate. “Import volumes were little changed last month, but they will probably rise soon, with increased government spending supporting the import-intensive construction sector,” she added.
The Association of Southeast Asian Nations (ASEAN), a group of 10 countries, remains the largest market for Chinese goods, with exports to ASEAN increasing by 9.7% year-on-year in May, reaching $50.83 billion. In contrast, exports to the US saw a meagre growth of just 0.2% in May compared to the same period last year, while shipments to the European Union fell, dropping 3.9% year-on-year.
Chinese exports saw the fastest growth in steel, automobiles, home appliances and ships. Automobiles led the pack, with China exporting 569,000 cars, marking a growth rate of 26.8% compared to the same time last year.
China is currently under fire from both the US and the European Union, accused of overproduction and flooding foreign markets with cheap electric vehicles. Both have taken steps to impose tariffs on such vehicles. At the same time, China is worried that duties imposed on its EVs could lead to a drop in exports due to weakening domestic demand.
Lynn Song from ING Economics warned that if tariffs on Chinese strategic exports and automobiles are aggressive, there could be “potential for retaliation and escalation of trade friction.” “We remain cautious about the trade outlook for the second half of the year and expect its contribution to growth to decline,” Song noted.
Last week, an official survey revealed that factory activity in China slowed more than anticipated in May. The manufacturing purchasing managers index from the China Federation of Logistics and Purchasing has taken a dip, falling to 49.5 from 50.4 in April on a scale where 50 marks the divide between growth and contraction.
China’s recovery from the COVID-19 pandemic has been hampered by weaker global demand following interest rate hikes by the US Federal Reserve and other central banks to combat inflation. A downturn in China’s property sector is also putting a strain on growth. Economists say that China’s target of around 5% economic growth this year will necessitate more policy support.
