Chinese exports fell 7.5 percent in May and its economic recovery weakened

A staff member greets visitors at a kiln shop at the China Import and Export Fair, also known as the Canton Fair, in Guangzhou, Guangdong province, China April 16, 2023. REUTERS/Ellen Zhang/File ( STAFF/)

Chinese exports fell in May for the first time in three monthswhich aggravates the risks in the world’s second largest economy given the weakening of global demand.

Shipments abroad contracted a 7.5% compared to the previous year, until 284,000 million dollars, official data showed on Wednesday, worse than the median forecast of a 1.8% drop. Exports to most destinations contracted, with double-digit declines to places like USA, Japan, Southeast Asia, France and Italy.

Imports decreased by 4.5%, up to $218 billionbetter than the 8% drop forecast, leaving a trade surplus of 66,000 million dollars. Chinese purchases to most regions eased in May, with imports from Taiwan and South Korea contracting by more than 20%, signaling weak global demand for electronics.

The expansion of exports earlier this year was one of the bright spots in the economy, helping to shore up the recovery after China abandoned its pandemic rules. However, the latest data shows that the recovery has weakened, with manufacturing activity contracting in May and home sales growth slowing after a rebound earlier in the year.

The trade report is “another disappointing data that will raise concerns about growth and will intensify expectations for more political support,” he said. khoon gohStrategist at Australia & New Zealand Banking Group.

An aerial view shows cars for export at a port in Yantai, Shandong province, China May 3, 2023. China Daily via REUTERS/File
An aerial view shows cars for export at a port in Yantai, Shandong province, China May 3, 2023. China Daily via REUTERS/File (CHINA DAILY/)

The drop in Chinese exports and imports in May is further proof that weak demand, both domestic and external, is paralyzing the recovery. Once the statistical quirk that drove the April numbers is removed, these numbers give us a clearer picture of a challenging reality.

The drop in exports shows how the slowdown in the world economy is beginning to affect China. Data on Wednesday showed that the value of exports fell from April, marking the second straight month-on-month decline. The economists surveyed by Bloomberg they anticipate that Chinese exports contract throughout the year.

There is increasing speculation that Beijing may have to apply more stimuli to drive growth. Some economists expect the central bank to cut banks’ reserve requirement ratios in the coming months, while others say an interest rate cut may be necessary, possibly as early as next week.

China - Economy - Unemployment
People collect packages from a delivery courier outside an office building in Beijing, Tuesday, May 16, 2023 (AP/Mark Schiefelbein/File) (Mark Schiefelbein/)

A bright spot for Chinese exporters was continued strength in global demand for Chinese cars, with total vehicle shipments hitting a monthly record of 9 billion dollars. One of the drivers of the recent rise in auto exports has been the popularity of Chinese electric vehicles abroad, although shipments of other types of cars have also increased.

The benchmark CSI 300 Index closed Wednesday lower than 0.5%, below their Asian counterparts. The yuan weakened a 0.1%standing at 7.1367 per dollar at 16:37 local time.

The regime set a relatively conservative growth target of around 5% for the year, which most economists expect to be reached even with the recent drop in activity. Consumer spending on travel and restaurants has so far fueled the recovery in the economy, while industrial activity has lagged.

(With information from Bloomberg)

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