China’s May exports plunge as domestic consumption falters
China experienced a sharp decline in exports in May, with a 7.5% year-on-year drop, marking the largest decrease since January. This slump in exports is attributed to weakened demand for Chinese goods, while imports also fell by 4.5%. The decline in exports has led to increased pressure on the government to boost domestic consumption for the remainder of the year, as global demand is expected to weaken further.
South Korean data revealed that shipments to China slid 20.8% in May, with Korean semiconductor exports dropping 36.2%, indicating weak demand for components for final manufacture. Zhiwei Zhang, chief economist at Pinpoint Asset Management, stated, “The weak exports confirm that China needs to rely on domestic demand as global economy slows.”
China’s factory activity also contracted more than anticipated in May due to weakening demand, as shown by the official purchasing managers’ index (PMI). PMI subindexes revealed that factory output contracted, and new orders, including new exports, fell for a second month.
Analysts have begun downgrading their expectations for China’s economy for the rest 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 missing the 2022 goal.
