China’s overseas shipments accelerated from a year earlier in May, aided by more buoyant global demand, and robust imports signaled resilience in the domestic economy.

Key Points

  • Exports rose 8.7 percent in May in dollar terms, more than the 7.2 percent increase forecast by economists in a Bloomberg survey
  • Imports surged 14.8 percent in dollar terms, more than the 8.3 percent forecast
  • The trade surplus widened to $40.81 billion

Big Picture

A brighter international outlook is supporting China’s manufacturing machine, with the World Trade Organization saying it expects trade to “expand moderately” in the second quarter. After a solid start to the year, the domestic economy had shown signs of weakening momentum, though May’s robust import figures could imply that domestic demand will hold up. While China’s import data can sometimes be skewed by big moves in commodity prices—it’s the world’s top ore buyer—the value of commodities remained broadly stable over May.

China’s imports from the U.S. rose 27.1 percent in dollar terms in May from a year ago, as a low base last year partly contributed to the surge. That said, growth of China’s imports since the beginning of the year has reversed a contraction from the past two years—at a time when the Trump administration has been vocal about cutting trade deficit with the world’s largest exporter.

Economist Takeaways

The economy still has strong momentum, with major export destinations such as the U.S. and Europe “operating in a steady way,” said Yao Shaohua, an economist at ABCI Securities Co. in Hong Kong, who had the most accurate imports forecast. He sees full-year import growth rising to 10 percent and exports increasing by 4 percent. “It’s good timing for regulators to cut financial leverage as the economy is strong. The PBOC will watch how the economy is doing when pacing its deleveraging efforts.”

“Global external demand is strengthening,” said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA in Hong Kong. “The trade surplus figures are quite good and even more so if you look at import and export figures in volume. Exports are ballooning.”

“Imports, in particular, held up surprisingly well,” wrote Julian Evans-Pritchard at Capital Economics in Singapore. “But given the approaching headwinds to the economy from policy tightening, we doubt this strength will last.”

“The further pick-up in growth of exports to the US and EU increases the likelihood that the current global trade improvement is sustainable,” wrote Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong. “Imports were stronger than expected, with volumes up significantly. Nonetheless, even though the headline year-on-year data should continue to look decent in the coming months, the cooling of China’s domestic demand that we expect should weigh on imports in the rest of 2017.”

The Details

  • Iron ore imports jumped 7.9 percent by volume from a year earlier and 67.7 percent by value in the first five months of the year
  • Coal imports surged 133 percent by value and crude oil 64.9 percent in the same period
  • Exports to the U.S. rose 11.5 percent against a year earlier, to $156.1 billion in first five months of the year