By Elias Glenn
Beijing (Reuters) – China’s exports fell more than expected in May as global demand remained stubbornly weak, but imports beat forecasts, pointing to improving domestic demand and adding to hopes that the world’s second-largest economy may be slowly stabilising.
Exports fell 4.1 percent from a year earlier, the General Administration of Customs reported, saying the foreign trade environment remains a challenge.
Imports dropped 0.4 percent from a year earlier, the 19th straight month of declines but the smallest since they turned negative in November 2014.
The improvement likely reflected higher commodities prices but also a pick-up in domestic demand as Beijing hikes spending on big infrastructure projects to support growth.
China’s May crude oil imports jumped the most in over six years, with iron ore imports the highest since December and purchases of copper up more than 19 percent.
“Imports were better, due to a rebound in commodities prices and signs of restocking by firms,” said Liu Yaxin, an economist at Merchants Securities in Beijing.
But Liu said: “We are not optimistic about the economy in the second half due to limited policy support, and the government’s push to cut (industrial) overcapacity could weigh on growth… We expect the economy to grow 6.8 percent in the second quarter.”
Indeed, the outlook remained grim for China’s exporters. Shipments have now fallen for 10 of the last 12 months and there are few signs that a prolonged global trade slump is abating.
China’s shipments to the United States – its top export market – fell 12 percent in May, while shipments to the European Union – its second biggest customer – fell 2.1 percent.
“We do not expect any substantial rebounds in coming months,” said Chester Liaw at Forecast PTE in Singapore.
China’s trade surplus was $49.98 billion in May, versus forecasts of $58 billion and April’s $45.6 billion.
Economists polled by Reuters had expected May exports to fall 3.6 percent, twice the pace seen in April, and expected imports to fall 6 percent, following April’s 10.9 percent drop.
Some analysts had speculated that upbeat March economic data was largely due to a jump in steel industry activity but thought it would taper off as domestic steel prices fell.
But data showed China’s steel exports rose 3.7 percent in May from April, as cash-hungry mills shipped more abroad despite growing tensions with major trading partners which are accusing Chinese firms of dumping product on glutted world markets.
WILL IMPORTS TURN POSITIVE?
Analysts said import performance could improve further later in the year as Beijing’s more than one-year-long stimulus campaign finally seems to be paying bigger dividends.
“The bigger-than-expected improvement suggests that import volumes, which have held up relatively well recently and are a better gauge of underlying demand, may also have picked up,” Julian Evans-Pritchard, China economist at Capital Economics, said in a note.
“Import growth is likely to edge up further for the remainder of this year as the fall in commodity prices during the second half of 2015 enters the base for comparison and the feed-through from earlier policy easing helps prop up domestic demand. We expect it to return to positive before long.”
There was little indication that May’s trade performance would pressure China into any near-term change in its currency policy.
“We don’t expect the trade figure will change the PBoC’s attitude towards the RMB exchange rate. They still prefer stability,” ANZ analysts said in a note.
Chinese officials repeatedly pledged in two days of talks with their U.S. counterparts this week that they saw no need for a sustained weakening of the yuan currency, which many investors fear could shock the already sluggish U.S. and global economies and roil financial markets as happened in January.
(Reporting by Elias Glenn, Kevin Yao, and Sue-Lin Wong; Editing by Kim Coghill)