May imports weaker than expected-Exportimes May imports weaker than expected-

May imports weaker than expected

Date : 2016-05-13 | From : China Daily

China's exports gained traction in May but imports contracted, the General Administration of Customs said yesterday, indicating that securing trade targets remains a struggle.

Weak domestic demand and the recent strengthened oversight on financial activity, including using commodities as collateral, were among the reasons for imports being weaker than expected, analysts said.

Exports rose 7 percent from a year earlier to 195.4 billion US dollars last month, the pace quickening from the marginal increase of 0.9 percent in April. However, imports fell 1.6 percent to 159.5 billion dollars, reversing the gain of 0.8 percent a month earlier and against market expectations of a 6 percent rise.

“The pickup in exports was a result of improving demand in advanced economies and China’s supportive policies,” said Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd. “However, the imports came in much weaker than forecast. We view the drop was largely due to the more stringent regulation.”

Chinese regulators have been investigating commodity financing at Qingdao Port, including whether companies use the same copper, aluminum or iron ore as collateral for multiple loans.

It is understood that China’s commercial banks will likely further tighten the commodity financing business, which will pose a significant pressure on imports.

Xue Jun, an economist at CITIC Securities Co, said the sharp deterioration in imports also reflected the fact that domestic demand has yet to stabilize.

“China’s economy is still under pressure, with the biggest threat coming from the property sector,” Xue said.

The real estate market has been experiencing a sharp slowdown in terms of sales in the past few months, casting a shadow on China’s economy, which had shown signs of improvement at the start of this month.

Both the official Purchasing Managers’ Index and its counterpart weighted toward private firms increased last month, pointing to improving factory activity and a stabilizing economy.

On Friday, the World Bank said the country’s economy could grow 7.6 percent this year, beating the government’s target of 7.5 percent due to supportive policies and initial reform results. But the bank warned “the recovery in exports may not materialize if growth in advanced countries weakens.”

China has introduced some mini-stimulus in the past two months to bolster trade growth while keep reforms on track. The measures included the reduction of red tape for traders, construction of more trade zones to nurture competitive importers and exporters, optimizing the structure of trading slanted toward higher added value products, and a promise to allow the market a bigger role in determining the yuan’s exchange rate.

China’s trade surplus widened substantially to 35.9 billion dollars in May from 18.5 billion dollars in April.

“It suggested that the yuan’s appreciation pressure remains,” Zhou said. “In addition, the new quantitative easing action by the European Central Bank indicates that China will continue to face strong capital inflows over the next few quarters.”

In the first five months, China’s trade edged up 0.2 percent, trailing the government’s 7.5 percent target. Shanghai’s trade gained 6.1 percent during the January-May period.

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