China Exports Likely Grew More Quickly in May

China’s exports likely grew more quickly and for a second month in May thanks to improving overseas demand, giving officials some comfort as they navigate numerous challenges at home to shore up an uneven economic recovery.

Expected Trade Data for May:

Trade data for May is expected to show that outbound shipments grew by 6.0% year-on-year in value, according to the median forecast of 32 economists in a Reuters poll on Wednesday, up from the 1.5% increase recorded in April.

Imports likely grew 4.2% last month, slower than the 8.4% gain seen in April. The data will be released on Friday.

Varying Speeds of Economic Recovery:

Over recent months, a flurry of data has shown that different parts of the $18.6 trillion economy are recovering at varying speeds.

While first-quarter growth blew past forecasts and strong March export and output data suggested improving global demand might aid officials’ efforts to get the economy back on a more even keel, more recent indicators reflecting soft domestic consumption have eroded much of that earlier optimism.

Property Crisis and Deflationary Pressures:

Analysts say a protracted property crisis remains the biggest stumbling block to a full-blown economic revival.

At the same time, deflationary pressures continue to stalk the economy, and the U.S. and European Union are threatening China’s exports with tariffs.

Analyst Insights:

“Global demand is giving a bigger boost to China’s economy than we had anticipated this year, and foreign tariffs will make little difference to aggregate export performance in the near term,” said Julian Evans-Pritchard, head of China economics at Capital Economics, in a note. “We now think that China’s economy will expand 5.5% this year as a result,” he added.

Last week, the International Monetary Fund revised its China growth forecast by 0.4 percentage points to 5% for 2024 and 4.5% in 2025 but warned that the property sector remained a key growth risk.

Factors Aiding Trade Data:

The trade data will likely be aided by a lower comparison base after rising interest rates and inflation in the U.S. and Europe squeezed external demand last May.

However, a global cyclical upturn in the electronics sector that saw South Korean exports to China – a leading indicator of China’s imports – hit a 19-month high last month should also help exporters from the Asian giant.