China’s exports shrink, imports fall amid weak global demand
Chinese exports experienced a sharper decline than anticipated in May, while imports also fell, reflecting weak international demand and sluggish domestic consumption. In May, exports from the world’s second-largest economy dropped 7.5% year-on-year, the largest decrease since January, compared to 8.5% growth in April. Imports shrank by 4.5%, a slower rate than the 7.9% decline in the previous month.
The disappointing export performance indicates a lack of demand for Chinese products, as well as weak import performance, as China imports parts and materials from overseas to assemble finished goods for export. Following the release of this data, Asian stocks, the yuan, and the Australian dollar all dipped.
China’s post-pandemic stock boom has waned as small investors become more cautious about equities and opt for safer assets during the country’s stuttering economic recovery. Both domestic and international demand have faltered, impacting the wider region. South Korean data revealed that shipments to China fell by 20.8% in May, marking a full year of monthly declines. Korean semiconductor exports experienced a 36.2% drop, indicating weak demand for components for final manufacturing. Chinese imports of semiconductors decreased by 15.3%.
Demand for raw materials, such as coal and copper, has also weakened. Coal imports retreated from the 15-month high reached in March, due to reduced appetite from the power and steel sectors. Copper imports declined by 4.6% in May compared to the previous year.
“The weak exports confirm that China needs to rely on domestic demand as the global economy slows,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “There is more pressure for the government to boost domestic consumption in the rest of the year, as global demand will likely weaken further in the second half.”
After exceeding expectations in the first quarter, analysts have downgraded their economic forecasts for the remainder of the year, as factory output continues to slow amid persistently weak global demand. The government has set a modest GDP growth target of around 5% for this year, after falling significantly short of its 2022 target.
