China’s exports grew at their fastest pace in more than a year in May, rising 7.6% year-on-year to USD 302.35 billion, according to customs data released on Friday. This robust growth, the highest since April 2023, defied ongoing trade tensions with the US and Europe. However, imports increased by only 1.8% to USD 219.73 billion, falling short of analysts’ expectations of around 4% growth.
The impressive export figures are partly attributed to a lower base from the same period last year, when exports had declined by 7.5%. In April, exports had grown by 1.5% while imports saw an 8.4% rise.
The surge in exports resulted in a widening trade surplus, reaching USD 82.62 billion in May, up from USD 72.35 billion in April. This growth occurred even as China faced heightened trade tensions with the US and Europe. The US has been increasing tariffs on Chinese-made electric vehicles (EVs), and Europe is considering similar measures.
“Foreign tariffs are unlikely to immediately threaten exports; if anything, they may boost exports at the margin as firms speed up shipments to front-run the duties,” noted Zichun Huang of Capital Economics. Huang also pointed out that a weaker real effective exchange rate would continue to support exports.
Despite the positive export data, import volumes remained relatively unchanged. However, Huang expects a rise soon, driven by increased government spending supporting the import-intensive construction sector.
Among China’s trading partners, the 10 nations of the Association of Southeast Asian Nations (ASEAN) remained the largest destination for Chinese products. Exports to ASEAN grew by 9.7% year-on-year in May to USD 50.83 billion. Exports to the US saw a modest increase of 0.2%, while shipments to the European Union declined by 3.9%.
The fastest-growing categories of Chinese exports included steel, automobiles, home appliances, and ships. Notably, automobile exports surged by 26.8% year-on-year, with China exporting 569,000 cars.
China faces accusations from the US and the EU of overproducing and flooding overseas markets with cheap EVs, prompting both to impose tariffs. Lynn Song of ING Economics warned of potential retaliation and escalation of trade friction if tariffs on Chinese strategic exports and automobiles are aggressive. “We remain cautious about the trade outlook for the second half of the year and expect its contribution to growth to decline,” Song said.
Factory activity in China slowed more than expected in May, as per an official survey. The manufacturing purchasing managers index from the China Federation of Logistics and Purchasing fell to 49.5 from 50.4 in April, indicating a contraction in the sector.
China has struggled to recover from the COVID-19 pandemic, grappling with weaker global demand following interest rate hikes by the US Federal Reserve and other central banks to combat inflation. A slump in China’s property sector has also weighed on growth. To achieve its target of around 5% economic growth this year, economists suggest that China will need more policy support.
As China navigates these economic challenges, the resilience shown in its export performance provides a crucial buffer against the headwinds it faces on the global stage.