Numbers have a habit of only telling half the story. Data released by the General Administration of Customs showed that China’s trade surplus with the rest of the world surged to US$41.65 billion last month compared to $13.8 billion in April.
To underline the rise in demand, the politically sensitive surplus with the US topped nearly $27 billion from $21 billion during the same period.
Still, imports took a major hit, falling 8.5%, which was the sharpest drop since July 2016.
“While exports rose in May, weaker global demand and the escalating trade war suggest they will start to fall again before long,” Marcel Thieliant, a senior economist at Capital Economics, said in a note.
The figures published by Beijing come at a difficult time for the world’s second-largest economy. Trade talks with Washington have stalled while the threat of more tariffs is on the horizon.
Adding to the toxic mix has been the decision to “blacklist” Huawei and the ongoing extradition court case in Canada involving the Chinese telecom giant’s Chief Financial Officer Meng Wanzhou.
The daughter of the group’s founder and CEO Ren Zhengfei has been accused by the US of violating Iran sanctions, an allegation she has denied.
So far, President Donald Trump’s administration has more than doubled duties on Chinese imports worth $200 billion. He has also threatened to add tariffs on the rest of goods and products entering the US, totaling another $300 billion.
In response, Beijing has increased taxes on US imports worth $60 billion as the war of words escalated.
China is also preparing its own blacklist of “unreliable” companies and has suggested it could halt US exports of rare earth minerals, a key component in the high-tech industry and crucial in producing semiconductors, smartphones and even smart cars.
The only silver lining to this economic perfect storm is that Trump is still expected to meet President Xi Jinping at the Group of 20 summit in Japan later this month.
“For now, both sides – from an economic standpoint – have a lot to gain from doing a deal,” Johanna Chua, the head of Asia economics and market analysis at Citigroup, told CNBC. “But I think from the politics side, it’s actually getting tougher.”
Already the conflict is developing into a new economic Cold War with the shockwaves rippling across the globe.
At the G20 meeting between finance leaders in the southern Japanese city of Fukuoka, there was a blunt message issued in the final communique on Sunday.
“Global growth appears to be stabilizing, and is generally projected to pick up moderately later this year and into 2020,” it said. “However, growth remains low and risks remain tilted to the downside.
“Most importantly, trade and geopolitical tensions have intensified. We will continue to address these risks, and stand ready to take further action,” the communique added.
Even China’s buoyant export numbers have a caveat attached.
Analysts attributed the rise in May to manufacturers speeding up the shipments of goods and products ahead of increased tariffs. They are also predicting a drop in orders later in the year if the trade war continues.
“The better-than-expected exports in May, which could have been helped by a depreciation in … [China’s currency] and front-loading of shipments amid fears of higher US tariffs, do not change our overall cautious view on China’s export look for 2019,” Betty Wang, a senior China economist at ANZ Research, said in a note.