China’s exports jumped in May as factories resumed operations and logistics bottlenecks eased following the lifting of some Covid restrictions in Shanghai.
Imports grew for the first time in three months, in welcome relief for Chinese policymakers as they navigate an economic path out of supply-side shocks that rocked markets in recent months.
Still, China’s exports outlook remains hostage to global risks – from high raw material costs, uncertainties from the Ukraine war, slowing overseas demand and a possible return of Covid. Recovering production in other economies and a shift of global spending from goods to services could also affect demand for Chinese goods.
Outbound shipments in May jumped 16.9% from a year earlier, the fastest growth since January this year, and more than double analysts’ expectations for a 8.0% rise. Exports were up 3.9% in April.
Imports, on the other hand, rose 4.1% in May from a year earlier, the first gain in three months and compared with flat growth in April. They were expected to rise 2.0%.
“In May, logistics and supply chains were well repaired, so from the view of supply, unfavorable factors which weighed down export growth in April have greatly eased, leading to a jump in the year-on-year growth last month,” Zheng Houcheng, director of the Yingda Securities Research Institute, said.
Sluggish Domestic Demand
Zheng added that imports, although beating forecasts, still reflected sluggish domestic demand.
Economic activity cooled sharply in April as the country grappled with the worst Covid-19 outbreak since 2020. Stringent lockdown measures, sometimes excessively enforced by local officials, had clogged highways and ports, stranded workers and shut factories.
To stabilise the situation in a politically sensitive year, the State Council has called on local officials to revive supply chains, restore economic growth and rein in unemployment. Major automakers have been able to ramp up production in May and cargo handling capacity at ports and airports are returning closer to pre-lockdown level.
Electric car maker Tesla reopened its factory in Shanghai on April 19 after a 22-day stoppage, and returned to pre-lockdown production levels in late May.
The Shanghai port, which was running at severely reduced capacity in April, has also been handling more cargo since last month, with official data showing that daily container throughput at the world’s biggest port was allegedly back to 95% of the normal level in late May.
$78bn Trade Surplus in May
Official and private surveys showed China’s factory activity contracted at a slower pace in May as Covid-19 curbs in major manufacturing hubs eased, with a gauge on export orders improving.
China posted a trade surplus of $78.76 billion last month, versus a forecast for a $58 billion surplus in the poll. The country reported a $51.12 billion surplus in April.
China’s cabinet recently announced a package of 33 measures covering fiscal, financial, investment and industrial policies, although analysts say the official GDP target of around 5.5% for this year will be hard to achieve without doing away with the zero-Covid strategy.
The central bank in May cut its benchmark reference rate for mortgages by an unexpectedly wide margin, its second reduction this year as Beijing seeks to revive the ailing housing sector to prop up the economy.
First-quarter gross domestic product (GDP) expanded by 4.8% from a year earlier, but analysts expect growth this quarter would take a heavy hit due to the lockdowns in Shanghai, with some economists warning the risk of recession is rising.
- Reuters with additional editing by Jim Pollard