Trade shrinks for a third month in latest growth slump

China’s exports fell for a third month in May, while imports slumped the most in three months, underscoring a sluggish domestic environment that may trigger more monetary policy support.
Overseas shipments fell 2.8 percent from a year earlier in yuan value, the customs administration said in Beijing yesterday. Imports slid 18.1 percent, leaving a trade surplus of 366.8 billion yuan (USD59.1 billion). U.S. demand helped prevent a deeper decline in shipments abroad.
The trade slowdown coincides with a slump in investment growth that is putting Premier Li Keqiang’s 2015 growth target of about 7 percent at risk. In response, officials have eased monetary policy and engineered a debt swap for local governments so they can keep funding infrastructure projects.
“What concerns me is the weaker-than-expected import growth in May, suggesting the domestic demand recovery is uncertain,” said Zhao Yang, chief China economist at Nomura Holdings Inc. in Hong Kong. “Monetary policy will continue to ease to support domestic demand.”
The Shanghai Composite Index gained 2.2 percent at the close, the highest since January 2008 on expectations the government may roll out more stimulus.
China’s exports fell 2.5 percent last month from a year earlier in dollar terms, while imports plunged 17.6 percent, leaving a trade surplus of $59.49 billion, customs data showed.
Imports were at the slowest pace since November as a downturn in construction linked to a weak property sector hurt demand.
“The fall in imports show weak domestic demand, even after excluding the price factors” of commodities, said Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong.
Early indicators for China’s economy in May had provided tentative hints at stabilization, with the official and the HSBC Markit purchasing managers’ indexes edging up, Bloomberg economists Fielding Chen and Tom Orlik wrote after the trade data. Yet total trade posted an 8 percent annual contraction in the first five months of the year, compared with the government’s target of 6 percent growth for 2015.
“Weakness in external and domestic demand requires a more aggressive policy response,” Chen and Orlik said. “Further policy easing is needed to support the economy and ensure it expands at a pace close to the government’s 7 percent target.” Bloomberg