China’s exports shrank much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to find demand abroad and domestic consumption remained sluggish.
Exports from the world’s second-largest economy fell 7.5% year-on-year in May, the biggest decline since January and swinging from 8.5% growth in April. Imports contracted 4.5%, a slower pace of decline than the 7.9% in the previous month.
The figures compared with a Reuters poll that showed economists forecast a much smaller 0.4% decline in exports and an 8.0% fall in imports.
The poor export performance reflects weak demand for Chinese goods as does the weak import performance as China brings in parts and materials from abroad to assemble finished products for export.
South Korean data last week showed shipments to China slid 20.8% in May, marking a full year of monthly declines, with Korean semiconductor exports dropping 36.2%, suggesting weak demand for components for final manufacture.
Chinese stocks trimmed gains and the Australian dollar, a commodity currency that is highly sensitive to swings in Chinese demand, fell after the trade data.
“The weak exports confirm that China needs to rely on domestic demand as 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.”
China’s factory activity shrank faster than expected in May on weakening demand, the official purchasing managers’ index (PMI) showed last week.
The PMI subindexes showed factory output swung to contraction from expansion while new orders, including new exports, fell for a second month.
Having beaten expectations in the first quarter, analysts are now downgrading their expectations for the 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 badly missing the 2022 goal.