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Chinese exports grew faster than expected in May, official customs data showed Friday, a boost for policymakers eager to boost economic momentum even as trade tensions rise.
Exports, in dollar terms, rose 7.6 percent year on year last month, compared with expectations of a 6 percent increase among economists polled by Reuters, and higher than any published figure since April last year.
Imports rose 1.8 percent year on year, far below forecasts.
The recovery in exports signals stronger overseas demand at a time when domestic consumption in China remains weak and has provided a further boost as officials target annual GDP growth of around 5 percent by 2024.
Faced with the consequences of a prolonged slowdown in the mainland’s real estate sector, Xi Jinping’s government has focused heavily on manufacturing as part of an enhanced industrial strategy.
“The drivers of growth appear to be both investment in the manufacturing sector and a recovery in exports, which is linked to stronger external demand,” said Carlos Casanova, senior economist for Asia at UBP. He pointed to a possible impact on Chinese exports due to a slowdown in US economic activity in the second half of the year.
Beijing’s prioritization of the industry has been criticized in the US and EU, which are expected to release the results next week of a months-long investigation into subsidies for Chinese electric vehicles.
The US imposed 100 percent tariffs on imported Chinese electric vehicles last month, although these won’t take effect until August and the affected volumes will be small compared to total trade between the two countries.
The European Commission’s decision will be closely monitored in all markets. According to a report from ING, Chinese car exports are up 20 percent so far this year, against the backdrop of a domestic price war between dozens of competitors.
Analysts suggested there was little sign of tensions hitting trade heavily, with those at Goldman Sachs suggesting “front-loading orders” could have boosted exports “at the margins”. Zichun Huang of Capital Economics suggested the tariffs are unlikely to threaten exports immediately. She expects these to remain robust in the short term and help drive full-year growth of 5.5 percent.
Lynn Song, chief economist for Greater China at ING, noted that official data shows exports to the EU and the US are “already in contraction” year on year. He pointed to a 17.4 percent increase in exports to Southeast Asia and an 8.6 percent increase to Latin America.
Song added that if EU tariffs expected next week are “very aggressive,” with markets watching to see if they rise above 50 percent, there is “potential for retaliation and escalation of trade friction.”
“We remain cautious about the trade outlook for the second half of the year and expect its contribution to growth to decline,” he said.
Chinese economic data have sent mixed signals in recent weeks. The official purchasing managers’ index published last week showed a decline in factory activity. A separate Caixin survey, which more accurately maps private rather than state-owned companies, showed a jump in activity in the same month.
National Bureau of Statistics economic data for April showed stronger industrial production, which includes manufacturing, but weak retail sales growth as consumers remained cautious. The IMF warned last month of the need for China to boost domestic demand rather than prioritizing its industrial strategy.
Chinese exports soared during the Covid-19 pandemic but fell for much of 2023 as trade activity normalized.
In a sign of the increasing urgency of the real estate slowdown, authorities last month unveiled new measures allowing the purchase of unsold properties by local state-owned companies.