chinese-exports-rise-while-domestic-demand-weak

China's exports accelerated for the second consecutive month in May, indicating that factory owners are successfully securing overseas buyers.

 

This growth offers some relief to the economy as it strives for a sustainable recovery.

 

Despite the positive export data, doubts remain about the sustainability of these sales, given the prolonged property crisis and its impact on domestic demand. This concern was underscored by the latest import figures, which showed a persistent weakness.

 

According to customs data released on Friday, outbound shipments from the world's second-largest economy increased by 7.6% year-on-year in value in May.

 

In contrast, imports rose at a slower pace of 1.8%, following an 8.4% jump the previous month, highlighting the fragility of domestic consumption. The export growth exceeded the 6.0% increase forecasted by economists in a Reuters poll and the 1.5% rise seen in April.

 

This boost was likely aided by a lower base of comparison from the previous year, when rising interest rates and inflation in the U.S. and Europe suppressed external demand.

 

The data also suggests a possible global cyclical upturn in the electronics sector, benefiting China's sales of components and finished goods.

Recent data has shown mixed signals about the recovery of China's $18.6 trillion economy, creating uncertainty about its outlook.

 

While first-quarter growth exceeded expectations and strong export and output data in March hinted at improving global demand, more recent indicators reflecting weak domestic consumption have tempered earlier optimism.

 

The ongoing property sector crisis remains the most significant drag on China's economy, with low investor and consumer confidence dampening domestic consumption and business activity.

 

Compounding policymakers' concerns, both new orders and new export orders sub-indices in a May survey of factory owners by the National Bureau of Statistics fell back into contraction after two months of growth.

 

However, Friday's trade data provides some respite for authorities as they continue efforts to achieve a broad-based economic recovery. Last month, the International Monetary Fund upgraded its China growth forecast for 2024 to align with Beijing's target of "around" 5%, but warned of risks from the property sector troubles.