Exports in the world’s second-largest economy last month fell 3.3% in US dollars compared to last year, customs data released this weekend showed, reversing a 3.5% increase in April.
Analysts link the decline in weak demand abroad: While China began to reopen its economy a few months ago, many other global powers have only just begun to lift some locking steps in recent weeks.
Recovery at home has not been completely smooth for China. Last month’s imports plummeted 16.7% in US dollars from a year ago – the deepest contraction since January 2016 – indicating domestic demand remains sluggish.
“Import data points to a weaker domestic economic trajectory at the opening than feared, even as China begins to increase infrastructure spending,” Mitul Kotecha, senior emerging market strategist at TD Securities wrote in a research note Monday.
China – which is struggling with a slowing economy even before the virus attacks – has been trying to get out of the slump. The country promised last month
to throw 3.6 trillion yuan ($ 500 billion) its economy this year in tax cuts, infrastructure projects and other stimulus measures as part of efforts to create 9 million jobs and blunt the impact of the pandemic.
And there are at least a few signs of recovering demand, driven by generous giving of cash. Passenger car sales rose in May for the first time in 11 months, according to data released Monday by the Chinese Passenger Car Association. The country sold 1.6 million new passenger cars last month, up 1.8% from last year.
But trade is still a sensitive point for China, which manages increased tensions with the United States. Blaming each other for the pandemic has upset relations between the world’s major economic superpowers, which could jeopardize their fragile trade ceasefire.
Data for May showed a record trade surplus of $ 62.9 billion, according to Koecha of TD Securities. President Donald Trump has often criticized China for running a large trade surplus with the United States.
However, economists at Capital Economics predict China’s exports will continue to weaken in the short term, before stabilizing at the end of this year.
They wrote in a research note Monday that they expect a contraction in global growth “to come out of this quarter,” laying the groundwork under exports through the return half of 2020.
Capital Economics economists also hoped that China’s stimulus measures should “encourage a strong import recovery.”
