China's exports posted their lowest growth rate in almost a year in May while imports unexpectedly fell, government data showed on Saturday, underlining concerns that growth in the world's second-largest economy could slow anew in the second quarter.
Evidence has mounted in recent weeks that the economy is fast losing growth momentum as sluggish domestic demand fails to make up for lethargic export sales.
The latest figures, shorn of the hot money speculation and exports to warehouses but booked as sales that had inflated previous months' data, more accurately reflect the grim reality facing China's exporters.
"The trade data reflects the sluggish domestic and overseas demand, signalling a slower-than-expected recovery in the second quarter," said Shen Lan, an economist at Standard Chartered in Shanghai.
Data for May retail sales and industrial output, as well as investment and inflation, are due on Sunday and could provide more evidence of the slowdown.
Exports edged up 1 per cent in May from a year earlier, the lowest growth since last July and against a median forecast in a Reuters poll of a rise of 7.3 per cent. Data was even worse for imports - they fell 0.3 per cent against expectations of a 6 per cent rise.
The trade surplus was $20.4 billion for the month, compared with market expectations of $19.3 billion.
Exports to the US, China's top export destination, fell 1.6 per cent in May, the third straight month of declines, while those to the European Union, the No.2 market, fell 9.7 per cent, also the third straight month of declines.
However in one bright sign, separate customs data showed that China's imports of major commodities rose in May compared to the previous month, helped by lower prices on world markets and pointing to resilient demand.
Testing times
It's been an uncomfortable few months for China's leaders as a raft of data has pointed to a lack of traction for growth in the economy.
Surveys earlier this month showed that China's factory activity shrank for the first time in seven months in May, with export orders falling, while growth in the services sector cooled.
A Reuters poll taken before Sunday's retail and industrial data shows industrial output is seen up 9.3 per cent, unchanged from April, while growth in fixed-asset investment, one of the two main drivers of China's economy in 2012, likely rose 20.5 per cent in the first five months of this year.
That would be equivalent to investment rising 20.2 per cent in May from a year ago, Reuters' calculations showed, the slackest pace in at least three months.
Growth in retail sales is forecast at 12.9 per cent in May, little changed from April's 12.8 per cent and below last year's monthly average expansion of 14.2 per cent.
The IMF and OECD last month cut their forecasts for China's 2013 economic growth to 7.75 per cent and 7.8 per cent, respectively.
China's annual economic growth had slowed to 7.7 per cent in the first quarter from 7.9 per cent in the previous quarter. The full-year annual growth of 7.8 per cent in 2012 was the weakest since 1999.
However, China's leaders have adopted a greater tolerance for a slowdown in the economy and are likely to allow quarterly growth to slip as far as 7 per cent before triggering fresh stimulus to lift activity, sources told Reuters this week.
No smoke and mirrors
One of the reasons the May export data was so grim is that the government had cracked down on the speculative activities that had created double digit rises in export growth every month this year even as China's main markets slowed.
"The dramatic slowdown in yoy (year-on-year) export growth in May in part reflects the impact of a clamp down by the government on firms dressing up financial inflows as exports," Louis Kuijs, an economist at RBS, said in an emailed note.
China's customs also acknowledged the lack of extraneous factors, reflected in the fact that exports to Hong Kong, the main centre for currency arbitrage and warehouse storage, grew only 7.7 per cent in May, down from a 57 per cent surge in April.
"The arbitrage trade to Hong Kong has basically been curbed and the trade between mainland and Hong Kong dropped sharply," it said on its website.
Copyright @ Thomson Reuters 2013
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
