China’s exports rose more than analysts estimated in May, helping to cushion a slowdown in the world’s second-biggest economy as an unexpected slump in imports highlights the risks to growth.
Overseas shipments gained 7 percent from a year earlier, the Beijing-based customs administration said today. That topped the median estimate of 6.7 percent in a Bloomberg News survey of analysts. Imports fell 1.6 percent, a drop that wasn’t forecast by any of the 42 analysts in a Bloomberg survey that had a median projection for a 6 percent gain. The trade surplus widened to $35.92 billion.
Stronger exports may bolster Chinese leaders’ confidence that a recovery in demand from the U.S. and Europe will support economic growth and reduce the need for stronger stimulus as the property market slumps. The European Central Bank’s unprecedented easing last week is a welcome step for China that should help export growth, World Bank economist Karlis Smits said on June 6.
“The export figures are positive news for policy makers and we expect continued solid export growth in the coming months amidst gradually improving global demand momentum,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong. “The import data suggest a pretty subdued state of the domestic economy though and the dilemma for the government is how to balance the need to reduce growth in leverage with all the calls for support.”
Tax Cuts
The government has announced a series of targeted policies to support the economy after growth slowed to 7.4 percent in the first quarter from a year earlier, the weakest pace since 2012 and below the government’s full-year goal of about 7.5 percent. Expansion may ease to 7.3 percent this year from 7.7 percent in 2013, according to the median estimate of analysts in a Bloomberg News survey last month, the least since 1990.
Measures have included help for exporters, tax cuts, speeding up investment in public housing and infrastructure, faster fiscal spending and a reduction in reserve requirements for some banks to spur lending to targeted sectors.
“Improving exports reduce the downside risks to growth, making broad-based stimulus less likely,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong.
Premier Li Keqiang said last week that local and central governments must fully implement these policies and reforms set out by the leadership to achieve this year’s targets, as downward pressure on the economy remains “relatively high,’ the official Xinhua News Agency reported on June 6.
Government Inspections
The State Council will dispatch eight inspection teams nationwide to check on implementation, Xinhua said in a report yesterday, citing a government statement. Many policies have not been fully carried out nor have they had the effects they should have and officials who have not fulfilled their duties will be punished, according to the statement.
China’s trade data have been distorted this year after figures in early 2013 were inflated by falsified invoices used to disguise capital flows. That triggered a government crackdown on the practice and led to a slump in year-over-year export growth in May of that year to 0.9 percent from 14.6 percent in April.
Trade numbers for May this year probably marked the first set of ‘‘clean” data free of the impact of distortions, according to RBS’s Kuijs.
‘Upside Risks’
In the U.S., China’s biggest export market, hiring increased by more than 200,000 for the fourth consecutive month in May and service industries expanded at the fastest pace in nine months, reports showed last week, signaling a broad-based rebound in the economy. The ECB on June 5 announced a cut in deposit rates to minus 0.1 percent to stimulate demand, a move that signals “upside risks” for China’s export growth, Smits said in Beijing the following day at a briefing on the nation’s economic outlook.
The increase in exports last month followed an unexpected gain of 0.9 percent in April after two months of declines. Estimates of 43 analysts ranged from a drop of 1.8 percent to a gain of 10.4 percent.
China’s steel exports have surged amid a domestic operating environment that Baoshan Iron & Steel Co. Chairman He Wenbo said in April is the harshest ever. Overseas shipments by Tangshan Iron and Steel Co. surged 35.5 percent in April from a year earlier and rose 39 percent in the first quarter, data from its parent Hebei Iron and Steel Co. show.
Financing Probe
May’s drop in imports compared with a median estimate for a 6 percent increase in a Bloomberg News survey, with forecasts ranging from a gain of 0.3 percent to 13 percent. The trade surplus, which was projected to be $22.6 billion, was the largest since January 2009, according to previously released data.
The fall in imports may be partly due to the government’s investigation into metal financing in China and to the lag in import orders made a couple of months ago when the economy slowed sharply, Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong, said in an e-mail.
Citigroup’s Ding said that the use of commodities to raise financing may have lost momentum because of a decline in the value of the yuan, contributing to the fall in imports.
The Chinese currency has dropped more than 2 percent against the U.S. dollar since the beginning of March, as the central bank guided the yuan lower and concerns grew that economic growth was slowing.