Comments
A bigger-than-expected slide in China’s imports in May strengthened expectations that more policy stimulus may be needed to avert a sharp slowdown in the world’s second largest economy. Economists say persistent weakness in the country’s imports points to a slackening domestic economy.
Meanwhile, erratic global demand and a relatively strong Yuan also cast doubts over the government’s ability to hit its full-year trade growth target of 6 per cent. Exports in May fell 2.5 per cent from a year ago, data from the General Administration of Customs showed on Monday, smaller than a 5 per cent fall forecast by economists, while imports tumbled 17.6 per cent versus an expected 10.7 per cent drop.
“The data shows the Chinese economy is still in the process of seeking a bottom. We expect trade conditions to continue to be sluggish in the following 4-5 months, with more government policy rolling out to stabilise (the economy),” said Liu Yaxin, a macro strategist at China Merchants Securities in Shenzhen.
Global pressure
Liu added that Chinese companies were being outflanked in global markets due to a firm Yuan, which has gained against major non-dollar currencies in recent months. China posted a near record trade surplus of $59.49 billion in May, but weak imports highlight slowing domestic consumption. Many analysts have already penciled in sub-7 percent growth for the second quarter, raising the risk that the government will not meet its full-year growth target of around 7 percent. China’s exporters have been struggling to cope with weak overseas demand, rising labour and currency costs, exacerbating downward pressure on the economy.
In May, exports to the US, China’s top market, rose 7.8 per cent from a year earlier, while shipments to the European Union, the second largest market, dipped 6.9 per cent, Customs data showed.
Remedy needed
“With more bad news likely on the economic front, the government is under pressure to come up with more supportive policy measures again,” Kevin Lai, senior economist at Daiwa Capital Markets in Hong Kong, said in a research note. “However, like the previous rounds of stimulus, the overall impact on the real economy would not be so meaningful.”
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.