September 17, 2019

China’s Export Growth Slows Amid Concern of Slowdown

HONG KONG — Chinese exports showed only modest growth in May, rising just 1 percent, officials said Saturday, an increase that was much lower than analysts’ expectations.

The 1 percent increase compared with a 14.7 percent rise in April, when the export figures were believed to have been artificially inflated. Before Saturday’s figure came out, analysts had been expecting Chinese exports to rise at least 7 percent in May.

The slowing of export growth comes as concern is rising about the slowing Chinese economy and tightening liquidity. The European Union, China’s biggest trading partner, remains mired in a stubborn economic downturn, while in the United States, China’s next-largest export market, the Federal Reserve has recently been sending signals it may start curtailing its stimulative monetary policies.

China’s May trade figures showed it had a trade surplus of $20.4 billion for the month, up from $19.3 billion, as imports declined 0.3 percent, the Customs Administration said. The drop in imports – however slight – was a possible sign of the weakness of the domestic economy.

The trade figures come as Chinese stocks last week saw their first weekly decline in six weeks amid signs of tightening liquidity within China. A clearer picture of the Chinese economy is expected to come Sunday, when the government releases data on retail sales, industrial output and inflation.

Economists had expected this month’s figures to show a slowdown as the government has begun a campaign to prevent companies from overstating their exports. Many businesses are believed to have done so in March and April as a way to bypass currency controls and bring more money into the country, so as to speculate on further appreciation of China’s renminbi.

The main evidence for such strategies lay in official statistics showing soaring exports to Hong Kong and to bonded export zones on the mainland itself, even as re-exports to the rest of the world from these places remained weak.

Louis Kuijs, an economist in the Hong Kong office of the Royal Bank of Scotland, had estimated in May that more than half of the officially reported growth of 14.7 percent in April from a year earlier was actually the result of companies’ manipulating their statistics so as to place bets on the Chinese currency. The true rate of export growth in April, eliminating the effects of these strategies, was more like 5.7 percent.

The dramatic slowdown in export growth in May “in part reflects the impact of a clamp down by the government on firms dressing up financial inflows as exports,” Mr. Kuijs said in an e-mail on Saturday.

Chinese customs data compiled by CEIC Data in Hong Kong showed that the mainland’s exports to Hong Kong were only up 7.7 percent in May from a year earlier. In April, they had been up 57.2 percent from the same month last year, and in March they had been up 92.9 percent.

Changing expectations about China’s currency – fewer business people now expect further appreciation – may have also reduced the incentive for companies to overstate exports, Mr. Kuijs said.

Article source: