People Bank of China - Photo: Special

JAKARTA (TheInsiderStories)China’s trade surplus increased to $41.7 billion (Rp592.14 trillion) in May, up to $27.9 billion from the previous month. The year-to-date surplus was $361.1 billion, larger than that of the same period last year, according to the General Administration of Customs on Monday (06/10).

China’s trade surplus against the United States (US) continued to expand owing to drops in soybean imports from the US and the front-loaded demand from the US in May.

China’s merchandise exports expanded 1.1 percent year on year (y/y) in May, moderately recovering from a 2.7 percent y/y contraction in the previous month,

Demand from the US, Japan, and the European Union as well as emerging countries all improved, despite exports to the US and Hong Kong, remained in contraction.

Front-loaded demand to avoid possible further tariffs on the remainder $300 billion of Chinese products may have helped to counterbalance the drag from tariffs on the $200 billion of Chinese goods as well as the weakening global economy. Exports of some consumer goods, such as textile and shoes, reportedly showed significant recovery.

China’s merchandise imports in May declined by 8.5 percent y/y, falling from 4.0 percent y/y expansion in April. Imports of crude oil, copper, soybean and integrated circuits declined significantly from April.

Meanwhile, China’s trade surplus with the US rose to $26.89 billion in May from $21.01 billion in April, the data showed.

The large trade imbalance between the two countries has been one of US President Donald Trump’s stated goals in applying elevated tariffs on American imports from China. But high-level negotiations between the US and China stalled after the president last month raised tariffs on $200 billion worth of Chinese goods, claiming that Beijing “broke the deal” in talks.

IHS Markit sees China’s weaker export growth is expected to continue throughout 2019 on vulnerable global economic growth and the uncertainties over the trade relationship with the US. That said, front-loaded demand may continue to support exports in June. IHS Markit projects China’s exports to grow 1.7 percent y/y in 2019 compared to 9.0 percent y/y in 2018.

The decline in imports suggested weakening domestic demand due to the withdrawal of stimulus policy after a stable growth in the first quarter of 2019. The escalating trade-tension may drag on imports as well. The government may release more aggressive supportive policy to drive economic growth, which will support import growth in the second half of 2019.

1US$=Rp14.200

Written by Lexy Nantu, Email: lexy@theinsiderstories.com