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China's exports increase as COVID restrictions are eased, but the trade situation remains uncertain

Image: Reuters Berita 24 English -  China's exports surged at a double-digit rate in May, above forecasts in a positive sign for the wor...

Image: Reuters

Berita 24 English -  China's exports surged at a double-digit rate in May, above forecasts in a positive sign for the world's second-largest economy, as factories resumed operations and logistical hiccups subsided following the easing of COVID restrictions in Shanghai.

Imports grew for the first time in three months, providing Chinese policymakers some welcome comfort as they attempt to steer the economy away from the supply-side shock that has rocked global trade and financial markets in recent months.

Investors actively monitor the prognosis for China's exports as a barometer of global economic health. Despite this, the future for China's exports indicates concerns from a months-long Ukraine war and rising raw material costs. In addition to the aforementioned issues, rising interest rates in the United States and Europe have heightened fears of a worldwide recession.

In May, outbound exports increased by 16.9 percent compared to the same month a year ago, marking the fastest gain since January of this year and exceeding analysts' estimates of an increase of 8.0 percent. Exports increased by 3.9% in April.

"We believe this recovery can continue if there are no additional lockdowns," said Iris Pang, chief economist for Greater China at ING, adding that the rise in both exports and imports was primarily attributable to the reopening of the Shanghai port in the latter week of May.

The daily container throughput at Shanghai port, which was operating at a significantly reduced capacity in April, returned to 95.3% of its typical level in late May, according to official figures.

"If global demand remains as robust as it has been since 2021, China's exports should maintain a 15 percent average annual growth rate through at least the third quarter of 2022," Pang added.

As a result of the most severe COVID-19 epidemic since 2020, economic activity slowed significantly in April. Strict lockdown measures, often imposed unreasonably by local officials, have blocked highways and ports, stranded workers, and closed companies.

The State Council has urged local officials to revitalize supply chains, restore economic growth, and control unemployment in order to stabilize the situation in a politically volatile year. Major automakers were able to increase production in May, and freight handling capacity at ports and airports is approaching pre-lockout levels.


Tesla reopened its Shanghai manufacturing on April 19 after a 22-day shutdown, dispatched its first batch of exports in early May, and resumed pre-lockdown production levels by the end of May.

China's factory activity decreased at a slower rate in May, according to official and private surveys, as COVID-19 restrictions in major manufacturing hubs eased and an indicator of export orders improved.

To alleviate increasing inflationary pressures, the United States is considering eliminating some tariffs on Chinese goods, which would be beneficial for Chinese exporters.

Imports increased by 4.1% year-over-year in May, the first increase in three months, as logistics bottlenecks eased and imports of raw materials and intermediate goods increased as domestic production resumed.

This contrasts with flat growth in April and predictions of a 2.0 percent increase.

The director of the Yingda Securities Research Institute, Zheng Houcheng, stated that although imports exceeded expectations, they nevertheless showed slow domestic demand.

China had a trade surplus of $78.76 billion in month, exceeding the poll's estimate of $58 billion. In April, a surplus of $51.12 billion was reported.

China's cabinet recently unveiled a large package of economic support measures, but economists say it will be difficult to attain the official GDP target of approximately 5.5% for this year without abandoning the zero-COVID strategy.

In May, the central bank slashed its benchmark reference rate for mortgages by an unexpectedly large margin, its second reduction this year, as Beijing strives to revitalize the struggling housing industry in order to prop up the economy.

According to Chang Ran, a senior economist at the Zhixin Investment Research Institute, the recent weakening of the Chinese currency will also boost exports and corporate earnings.

However, after the rebound in May and June, export pressures are expected to grow in the second half of this year due to base effects, rising global inflation, and the tightening of monetary policy in key nations.

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