Key facts
- China's exports are projected to grow 15% year-on-year in May, up from 14.1% in April.
- Strong demand for semiconductors and AI-related components is supporting export growth.
- A backlog of overseas orders, brought forward to preempt potential energy price increases, is a key factor.
- Imports are expected to rise by 25% in May, similar to April's pace.
- China's trade surplus is forecast to reach $92.1 billion in May.
China's export growth is anticipated to have strengthened in May, with forecasts from a Reuters poll of 32 economists suggesting a 15% year-on-year increase in dollar terms, up from April's 14.1%. This anticipated rise is attributed to a backlog of overseas orders, potentially brought forward due to concerns over energy price pressures linked to the Middle East conflict, and sustained global demand for semiconductors and AI-related components.
Despite the positive outlook for exports, economists expressed divided opinions on the sustainability of this growth. Some forecasts range as low as 10%, while others predict a jump to 19.5%. Data on new export orders in May showed a significant month-on-month decrease after a two-year high in April, suggesting that the trend of front-loading orders might be subsiding.
While strong exports contributed to China exceeding economic expectations in the first quarter, a subsequent cooling of momentum has raised concerns about the economy's reliance on external demand. This is particularly relevant given weakening domestic consumption, which could expose China if global conditions deteriorate. Imports are expected to remain robust, rising by approximately 25% in May, mirroring April's pace, with South Korea's export data showing a significant surge in demand for semiconductors and tech parts.
Chinese officials are facing international pressure to bolster domestic consumption. Critics argue that Beijing's economic model relies too heavily on importing components and re-exporting finished goods, potentially disadvantaging other emerging economies. The OECD highlighted that nearly 60% of Chinese firms' market share gains are linked to subsidies. Furthermore, a U.S. Federal Reserve paper indicated that China's trade surplus, relative to global GDP, has surpassed historical peaks seen in Japan and Germany, suggesting persistent industrial overcapacity that could influence global manufacturing for years to come. The trade surplus itself is projected to widen to $92.1 billion in May.