Photo by State Council Republic of China

By Brian Jackson, China Economist, IHS Markit

Key Points:

  • China’s merchandise exports grew 8.7% in May, compared to 8.0% in April, according to data from the General Administration of Customs. Modestly faster export growth was mostly the result of accelerating demand in the European Union and Hong Kong, stable demand in the US, and in spite of weaker demand from ASEAN. Faster export growth was primarily due to a 3.8 percentage point acceleration, to 5.8% growth, in exports of mechanical and electrical products.
  • China’s merchandise imports grew 14.8% in May, compared to 11.9% in April. Faster headline growth was due especially to accelerating demand for European goods, while demand for Korean and Japanese goods also improved; imports from ASEAN grew at a marginally slower pace. Imports of both mechanical and electrical products and high technology products, both indicative of great demand from China’s upstream Asian supply chain partners, accelerated by about 10 percentage points each to 8.0% and 10.4% growth, respectively.
  • China’s trade balance declined by a large degree. China’s trade surplus in May was USD 40.8 billion, a decline of USD 4.0 billion compared to a year ago. By comparison, the April trade surplus was down by about USD 1.8 billion year-on-year.

 

Outlook:

Trade will play a less positive role in GDP growth in 2017 than the previous year, but will increase sequentially from the first to second quarter. Year-to-date, China’s trade balance has declined USD 50.8 billion year-on-year, due primarily to fast-growing imports as a result of higher commodity prices in 2017. Meanwhile, the trade balance in the second quarter is down by only about USD 5.8 billion year-on-year, indicating that unless there is a major collapse in June the contribution from net exports will play a marginally negative role in the second quarter, which is an improvement relative to the first.

 

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