Robust rebound in a broad range of non-resources imports during May pushed China’s foreign trade growth far beyond expectations, in a sign that the world’s largest emerging economy is trying hard to avoid slipping into the doldrums amid Beijing’s stepped up ante against persistently high corporate and rapidly climbing household debt levels.
The latest trade report also suggests a shift in the dynamics between different industrial sectors, with higher value-added and innovation-driven producers now jumping into the driver’s seat as heavy industries took a backseat.
The apparent turn of fortunes would concur with an interesting discovery from the latest manufacturing PMI report, which showed a dimming outlook for large, probably state-owned, players while small and medium companies steadily experienced improving business prospects.
Hi-tech components, automobiles, aircrafts and pharmaceutical products were some of the main import categories that saw a significant increase in shipment arrivals during May. Similarly, purchases of soybeans and natural gas also accelerated when compared to April.
These gains more than compensated for the softer import growth seen across the core mineral and energy category, including coal and iron ore. Crude oil import growth was broadly on par with April’s.
Imports for May jumped 14.8% from a year earlier, accelerating from April’s 11.9%. Exports rose 8.7%, following the previous month’s 8% expansion. Both figures beat median estimates polled by Bloomberg, which were a 8.3% rise for import and a 7.2% for export.
Hi-tech products contributed nearly one fourth of the total value of imports growth in May. The intake of integrated circuit increased 9.87% from a year earlier, compared to the 3.98% rise in April.
Purchase values of foreign cars and planes rose substantially in May, gaining 16.9% and 74.22% from a year earlier, respectively, compared with the muted 1.87% rise for automobiles and a weak minus-22.79% contraction for aircraft in April.
Iron ore tonnage rebounded to 91.52 million metric tons, just 5% shy of the all-time high reached in December 2015, from a relatively muted 82.23 million metric tons in April.
The bounce back in volume did not fully translate into a higher import bill for the mineral as its average unit cost fell by a whopping US$10 to US$73.4 per tonne, the weakest since January.
Intake of crude oil hit the second biggest month ever, bouncing back to 37.2 million metric tons from 34.39 million metric tons in April, but in terms of value, growth was steady at up 50% from a year ago, the same as April’s. The average cost of basic fuel was flat from April at US$380 per metric ton.
Export momentum was firm, as first suggested in the PMI survey released on May 31. The cheaper yuan in May may have helped Chinese manufacturers to win additional export orders.
The CFETS yuan exchange rate index has declined to 92.26 by the end of May, down 2.57 points since the end of 2016, reaching its lowest level since the launch of the index at the end of 2015.
Thursday’s foreign trade data left the country with a trade surplus of US$40.81 billion, slightly below the forecasts for US$46.32 billion, but above US$38.05 billion in April.