BEIJING: Exports, the driver of China’s boom, fell 2.5 per cent from a year ago, a third straight month of decline. However, the drop was better than expected and compares with year-on-year falls of 6.4 per cent in April and 15 per cent in March.
As a result of falling imports, China’s trade surplus jumped to $59.5bn from $34.1bn in April. This is the third-biggest monthly surplus on record, following figures in excess of $60bn in January and February.
Louis Kuijs, an economist at RBS in Hong Kong, said the weak data underlined the need for more fiscal and monetary measures to boost the economy.
“At some point this year we should expect growth to bottom out,” he said. “But without stimulus, the domestic economy will remain very weak.”
Economists at ANZ agreed, arguing that consumption and investment were “bound to pick up” in the second and third quarters because of “fast implementation of fiscal policy and much eased monetary policy”.
They also believe the finance ministry’s decision to cut tariffs on some consumer goods will drive a “modest pick-up in Chinese imports soon”.
Expectations of further stimulus are likely to support Chinese equities, which have been the world’s best asset class over the past year despite the economic slowdown.
The Shanghai Composite emerged from negative territory following the data release, rising 2 per cent by mid-afternoon. But the smaller, technology-heavy Shenzhen Composite fell by 1.7 per cent.
Export-focused manufacturers, who thrived during the past decade as China became the factory of the world, are under pressure because of the strength of the renminbi relative to most other major currencies apart from the US dollar.
Mr Kuijs said that while export volumes actually rose year-on-year in May, Chinese manufacturers were having to cut prices in renminbi terms to stay competitive in Europe and other markets whose currencies have weakened.
Despite this squeeze on manufacturers’ profitability, he said the Chinese government was unlikely to let the currency weaken because it wanted to maintain stability against the US dollar as it sought to internationalise the renminbi.
