China’s May Trade Data: Surpassing Expectations in Exports and Imports

Exports saw a substantial increase, growing by 7.6% compared to the same period last year, reaching $302.35 billion. This growth, the most significant since April 2023, was partly attributed to a lower base in the preceding year, which saw a decline of 7.5% in exports during the same period. Meanwhile, imports rose by 1.8% to $219.73 billion, although this figure fell short of the anticipated 4% growth.

The widening trade surplus, reaching $82.62 billion in May from April’s $72.35 billion, underscored the robust performance in exports. Notably, the Association of Southeast Asian Nations (ASEAN) remained a primary destination for Chinese products, with exports to the region growing by 9.7% year-on-year to $50.83 billion in the January to May period.

However, amidst these positive indicators, concerns loom over escalating trade tensions with the U.S. and Europe. The U.S. is increasing tariffs on Chinese electric cars, while Europe contemplates similar measures. Such tensions could potentially impact China’s export trajectory.

Certain sectors, including steel, automobiles, home appliances, and ships, have experienced significant growth in exports this year. Particularly, automobile exports surged by 26.8% in the first five months compared to the same period last year, totaling 2.4 million vehicles.

Yet, challenges persist, especially regarding accusations of overproduction and concerns about weakening domestic demand. The U.S. and the EU have expressed worries about China flooding overseas markets with inexpensive electric vehicles, prompting discussions on tariffs. These potential tariffs could further complicate trade dynamics.

Economists, such as Lynn Song from ING Economics, remain cautious about the trade outlook for the second half of the year. Factors such as a slowdown in factory activity, as indicated by the manufacturing purchasing managers index falling to 49.5 in May, contribute to this caution. Moreover, China’s economic recovery post-COVID-19 is hindered by global demand weakness and domestic challenges, including a sluggish property sector.

To achieve its growth target of around 5% for the year, China may require additional policy support, according to economists. This could involve measures to stimulate domestic consumption, boost investment, and navigate through the complexities of international trade relations. Balancing these factors will be crucial for sustaining China’s economic momentum amidst a changing global landscape.