Unexpected Gain in Chinese Exports Is Seen as Temporary

(Bloomberg) -- China's exports unexpectedly rose in April aided by stronger shipments to South East Asia, though with the coronavirus pandemic damaging global demand that increase is likely to be temporary. Imports fell.

Exports rose 3.5% in dollar terms in April from a year earlier, while imports dropped 14.2%, the customs administration said Thursday. Economists had forecast that exports would shrink by 11% while imports would contract by 10%.

China's exports usually start slowly in the first quarter due to the Lunar New Year and then rise from April. While there were some signs in March of a recovery from the domestic slump at the peak of the outbreak, restrictions in other parts of the world to contain the pandemic had been expected to weigh on orders and disrupt supply chains, and the earliest indicators in April showed the nascent rebound was already losing momentum.

“April shipments may have been boosted by exporters making up for shortfalls in the first quarter due to supply constraints then,” according to Louis Kuijs, head of Asia economics at Oxford Economics Hong Kong Ltd. “As heralded by the weakness of new export orders in the PMIs, exports should weaken significantly in the near term as China's key trading partners fall into deep recession.”

The trade surplus was $45.3 billion in April, well above the median forecast of $8.7 billion. As of noon in Beijing, the customs administration had not released a detailed breakdown of the data in dollar terms or for April alone.

What Bloomberg's economists think
“The surprise increase in China's exports in April reflects a faster-than-anticipated recovery in production -- not a sign of reduced external pressure on the economy. Manufacturers were probably continuing to catch up on orders made before the pandemic struck. Once they get through the backlog, exports should more clearly reflect the impact of the drop-off in foreign demand.”
-- See here for full report from David Qu, Bloomberg economics

Export data in yuan terms indicated that a rise in shipments to SE Asia drove the better-than-expected performance. Shipments to Asean rose 3.9% in the first four months of the year. Exports to the EU dropped 6.6%, while to the U.S. they fell 15.9%.

The surprise increase in exports wasn't uniform across Asia - South Korea's exports in April fell by over 24%, the biggest drop since the global financial crisis, with shipments to all destinations down sharply.

Almost 2.8 trillion yuan ($395 billion) worth of mechanical and electrical goods were shipped from China in the first four months, with more than 800 billion yuan of that just in April, according to the data.

“As the volume of commodity imports actually rose, the decline in imports was driven by falling commodity prices,” said Raymond Yeung, chief China economist at Australia & New Zealand Banking Group in Hong Kong. “April's exports also reflected the pent-up demand of previous export orders for electronic products. Global work-from-home is also expected to be contributory to certain consumer electronic products. Nonetheless, this figure does not bode well for the US-China trade relationship. Trump's administration will certainly press for more going forward.”

With assistance from Bloomberg