China Exports Continue to Shrink as Demand Wanes
Exports and imports fall 4.1% and 0.4% in May, respectively
Exports slid 4.1% last month from the previous year, after declining 1.8% in April, the General Administration of Customs said Wednesday. The rate was slightly stronger than the median 4.6% decline economists had forecast.
Imports in the period fell by a less-than-expected 0.4% from a year ago, compared with a 10.9% drop in April, mostly due to rising commodity prices. The customs agency said China’s trade surplus widened to $49.98 billion in May from $45.56 billion in April.
“For exports, I’m very cautious, not only for this month but in the medium term,” said RHB Research Institute economist Zhang Fan. “For the next one or two quarters, I don’t think we’ll see much recovery in global demand.”
“Things are getting a bit tougher,” said Wang Meiqi, general manager at Yiwu Xindian, an exporter of children’s clothes, suitcases and T-shirts with annual revenue of 3 million yuan ($456,600). “We have more orders, but profits aren’t keeping up,” he said.
To stay competitive, the company is switching its focus from children’s wear—which faces tougher safety and quality requirements in the U.S. and Europe—to lower-value T-shirts with logos that sell better. “And we’re trying to team up with companies that might have more creative apparel ideas,” Mr. Wang said.
China reported a sharp rise in imports from Hong Kong, up 240% year-over-year in May, a shift economists said may be a sign businesses are trying to move money offshore and evade regulatory controls amid soft growth and a weakening yuan.
China’s imports of commodities in May were surprisingly robust, defying expectations of a seasonal downturn. Among imports, copper rose by 19% year over year, iron ore advanced by 19% and crude oil rose by 39%. The data came as commodity prices have risen since last week as the chances of a U.S. Federal Reserve interest-rate increase this month appeared to be increasingly remote.
Three-month copper prices on the London Metal Exchange rose by 0.5% to $4,588.50 a metric ton Wednesday.
In theory, China’s official import data from Hong Kong should roughly match Hong Kong’s official export data to China. But traders can use inflated import and export invoices to circumvent China’s capital controls. Hong Kong hasn’t released its May export figures, but exports to China declined 4.6% in April.
‘For the next one or two quarters, I don’t think we’ll see much recovery in global demand.’
China reported Tuesday that its foreign-exchange reserves fell by $27.9 billion to $3.19 trillion after rising during the two prior months.
Wednesday’s trade data add to the picture of an economy in slowdown. Though Beijing has set a goal of 6.5% to 7% growth for 2016—and recorded 6.7% growth in the first quarter—the government opted not to issue a trade target after trade fell 7% last year, missing its 2015 target by 13 percentage points.
As exports, a once vital engine of growth, fizzle, Beijing has stepped up its support. Last month, the State Council, China’s cabinet, pledged more credit for exporters and importers and a higher tax-rebate rate for cross-border shipments of some mechanical and electrical products.