China's May exports and imports increased at more than double the pace analysts estimated as trade with the U.S. rebounded, supporting growth in the world’s second-biggest economy as domestic demand slows.
Overseas shipments climbed 15.3 percent from a year earlier to a record, the Beijing-based customs bureau said today, exceeding all 29 forecasts in a Bloomberg News survey. Imports rose 12.7 percent compared with estimates for a 5.5 percent gain. The trade surplus also beat projections.
The data indicate Europe’s debt woes have yet to produce a collapse in world trade on the scale of the 2008 global recession, even as Spain’s request for a bank bailout threatens to deepen the crisis. Stronger exports may prompt Premier Wen Jiabao to be more measured in rolling out stimulus even as weaker-than-estimated output and retail sales data yesterday bolster the case for loosening.
“This shows it’s not all doom and gloom,” Song Seng Wun, an economist with CIMB Research Pte in Singapore, said after the trade figures were released. “Growth momentum may be slowing, but it’s not about to crash.”
China cut interest rates three days ago as the government counters the effects of Europe’s debt crisis and seeks to engineer a resurgence in an economy that JPMorgan Chase & Co. predicts will grow at the slowest pace since 1999.
Output Moderates
Inflation in May was a lower-than-estimated 3 percent and producer prices dropped for a third straight month, statistics bureau data yesterday showed. Industrial production growth was below 10 percent for a second month, the first time that’s happened in three years.
Retail sales, which aren’t adjusted for inflation, rose the least in almost six years, excluding the January and February holiday months. Fixed-asset investment, excluding rural households and not adjusted for inflation, rose 20.1 percent in the first five months, the weakest increase for a January-May period since 2001, according to previously released data.
“These data should defeat any remaining complacency that the policy response has been adequate to maintain steady growth,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, said yesterday after the statistics bureau reports. “More dramatic easing, especially in housing and local government financing vehicles is urgently needed and necessary to avoid a hard landing in the Chinese economy.”
Higher Exports
Shen, who previously worked for the European Central Bank, said he expected at least one more reduction in interest rates and three cuts in banks’ reserve requirements this year.
China, the world’s biggest exporter, has increased foreign sales and purchases every month since the end of 2009, after a year of falling trade during the depths of the global recession.
May exports grew the most since October, excluding New-Year holiday distortions, and compared with the median estimate for a 7.1 percent gain. Sales to the U.S. jumped 23 percent from a year earlier, the biggest increase this year, and shipments to the European Union rose for the first time in three months.
Imports rebounded from a 0.3 percent rise in April, with purchases from the U.S. close to the highest on record. Crude oil imports rose to a record, boosted by restocking as international prices dropped.
Global Demand
The increase in China’s exports and imports adds to evidence that some Asian economies are weathering weaker global demand. Australia’s trade deficit narrowed in April as iron-ore and coal shipments increased, the Bureau of Statistics reported on June 8. Singapore’s April exports rebounded by more than analysts estimated.
China’s trade surplus in the first five months surged 65 percent from a year earlier to $37.9 billion, according to customs bureau data. That may intensify calls from the nation’s biggest trading partners for faster appreciation of the yuan after gains stalled amid Europe’s debt crisis.
The yuan has declined about 1.2 percent this year after a 4.7 percent rise last year. It closed at 6.3705 per dollar on June 8. David Lipton, the International Monetary Fund’s first deputy managing director, said on June 8 the yuan is still undervalued, although to a lesser extent than previously.
The U.S. last month urged China to strengthen the yuan, while declining to brand the nation a currency manipulator. Presidential candidate Mitt Romney has said that, if elected, he will make such a designation on his first day in office.
The better-than-estimated performance of China’s exports reflects external improvements in the first quarter which won’t be sustained into the third quarter given weakening data out of the U.S. and Europe, said Chang Jian, a Hong Kong-based economist at Barclays Capital who formerly worked for the World Bank.
Chang estimates China’s full-year growth at 8.1 percent, down from 9.2 percent in 2011. JPMorgan sees a 7.7 percent pace.
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