BEIJING: China reported stronger-than-anticipated exports and imports for May despite falling commodity prices, suggesting the economy is holding up better than expected despite rising lending rates and a cooling property market. Concerns over China landed squarely back on global investors’ radar after Moody’s Investors Service downgraded its credit rating last month, saying it expects the country’s financial strength will erode in coming years as growth slows and debt continues to rise.
China’s imports have been strong in recent months, driven largely by iron ore and other commodities used to feed a year-long construction boom, while exports have rebounded from several years of contraction thanks to improving global demand. While the strength of the May import data surprised economists, and suggested domestic demand remains solid, analysts still expect the world’s second-largest economy to lose momentum gradually over the course of the year due to policy tightening.
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Government measures to cool heated home prices are expected to dampen property investment eventually and a crackdown on riskier types of lending is pushing up financing costs. “The current strength of imports is unlikely to be sustained if, as we expect, slower credit growth feeds through into weaker economic activity in the coming quarters,” Capital Economics’ Julian Evans-Pritchard wrote in a note. “Export growth is also likely to edge down but should fare better than imports given the relatively upbeat outlook for China’s main trading partners.” Growth in both exports and imports accelerated from April, defying expectations of a slowdown. Exports rose 8.7 percent from a year earlier, while imports expanded 14.8 percent, official data showed on Thursday. That left the country with a trade surplus of $40.81 billion (31.5 billion pounds) for the month, the General Administration of Customs said. Analysts polled by Reuters had expected May shipments from the world’s largest exporter to have risen 7.0 percent, easing from 8.0 percent growth in April.
Imports had been expected to have climbed 8.5 percent, pulling back from 11.9 percent in April. That was expected to produce a trade surplus of $46.32 billion, widening from April’s $38.05 billion. Sources at two steel mills told Reuters they expect output to remain high as profit margins and demand are still strong, even though construction activity in China tends to ease in summer due to intense heat and rain in parts of the county. “We think it’s quite obvious demand outperformed our expectations because of relatively strong housing and infrastructure sectors,” Richard Lu, an analyst at commodities consulting firm CRU, said ahead of the data.
