China’s Exports Plunge in May, Casting Doubts on Global Economic Outlook
ByNikhilAhirekar
China’sexportandimportdataforMayhasraisedconcernsabouttheglobal economicrecovery,particularlyindevelopedmarkets.Accordingtothedata releasedbyChina’sCustomsBureauonWednesday,exportsexperienceda
sharperdeclinethananticipated,withayear-on-yearslumpof7.5%inMay.This contractionfarexceededtheforecasted0.4%fallandmarkedthelargestdecline sinceJanuary.Meanwhile,importscontractedby4.5%,whichwasslowerthan theexpected8.0%declinebutstillreflectiveofadownwardtrend.
Impact on the Asian Region
ThenewsofChina’sdisappointingtradefigureshadanimmediateimpacton Asianstocks,aswellasontheyuanandtheAustraliandollar,whichareclosely tiedtoChinesedemandforcommodities.Thisdevelopmentfollowsafading post-pandemicstockrallyinChina,assmall-scaleinvestorshavebecomemore bearishonequitiesandturnedtowardssaferassetsamidanuncertaineconomic recovery.
ThedecliningexportandimportfiguresfromChinahavebroaderimplications fortheregion,asdemonstratedbySouthKorea’srecentdatashowinga20.8% slideinshipmentstoChinainMay.Thisdeclinemarkedayearofconsecutive monthlydeclines,withsemiconductorexportsfromKoreaexperiencinga particularlysignificantdropof36.2%.Furthermore,Chineseimportsof semiconductorsfellby15.3%,indicatingweakeneddemandforconsumer electronicsandrelatedcomponents.
Theeffectsoffalteringdemandhavealsoimpactedthemarketforrawmaterials, withcoalimportsretractingfromtheir15-monthhighinMarchduetoreduced appetitefromthepowerandsteelsectors.Additionally,copperimportsdeclined by4.6%inMaycomparedtothepreviousyear.
Reduced Factory Activity
China’sofficialpurchasingmanagers’index(PMI),releasedlastweek,provided furtherevidenceofacontractingmanufacturingsector.FactoryactivityinMay shrankatafasterratethananticipated,withsubindexesrevealingcontractions infactoryoutputandneworders,includingnewexports,forthesecond consecutivemonth.
WhileChina’seconomicgrowthsurpassedexpectationsinthefirstquarter, analystsarenowrevisingtheirforecastsfortheremainderoftheyearduetothe slowingfactoryoutput.ThegovernmenthassetamodestGDPgrowthtargetof around5%for2023afterfallingshortofits2022goal.
Economists,suchasJulianEvans-PritchardfromCapitalEconomics,anticipate furtherdeclinesinexportsbeforereachingabottomlaterintheyear.They attributethistrendtothelaggedimpactofinterestratehikesindeveloped economies,whichisexpectedtoweakeneconomicactivityandpotentially triggermildrecessionsinsomecases.
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