China exports tumble in May as global demand falters
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China’s exports shrank much faster than expected in May as manufacturers struggled to find demand abroad.
PHOTO: AFP
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BEIJING - China’s exports shrank much faster than expected in May while imports extended declines with a grim outlook for global demand, especially from developed markets, raising doubts about the fragile economic recovery.
The world’s second-largest economy grew faster than expected in the first quarter thanks to robust service consumption and a backlog of orders following years of Covid-19 disruptions, but factory output has slowed as rising interest rates and inflation squeeze demand in the United States and Europe.
Exports slumped 7.5 per cent year on year in May, data from China’s Customs Bureau showed on Wednesday, much larger than the forecast 0.4 per cent fall and the biggest decline since January.
Imports contracted 4.5 per cent, slower than an expected 8 per cent decline and April’s 7.9 per cent fall.
“The weak exports confirm that China needs to rely on domestic demand as the global economy slows,” said Dr Zhang Zhiwei, chief economist at Pinpoint Asset Management.
“There is more pressure for the government to boost domestic consumption in the rest of the year, as global demand will likely weaken further in the second half.”
Highlighting the extent of the weakness, the data shows trade was worse than when the port of Shanghai, China’s busiest, was shut down due to strict Covid-19 curbs a year earlier. The figures also add to a growing list of indicators that suggest China’s post-Covid-19 economic recovery is quickly losing steam, bolstering the case for more policy stimulus.
Demand squeeze
Asian stocks fell into the red after the data, as did the renminbi and the Australian dollar, a commodity currency that is highly sensitive to swings in Chinese demand.
China’s economy has been hit by a double whammy of faltering demand at home and abroad, with the ripple effects felt across the region.
South Korean data last week showed shipments to China slid 20.8 per cent in May, marking a full year of monthly declines, with South Korean semiconductor exports dropping 36.2 per cent, suggesting weak demand for components for final manufacture.
China’s factory activity shrank faster than expected in May on weakening demand, the official purchasing managers’ index (PMI) showed last week.
The PMI sub-indexes showed factory output swung to contraction from expansion while new orders, including new exports, fell for a second month.
Having beaten expectations in the first quarter, analysts are now downgrading their expectations for the economy for the rest of the year, as factory output continues to slow amid persistently weak global demand.
The government has set a modest gross domestic product growth target of around 5 per cent for 2023, after badly missing the 2022 goal. REUTERS
