Key facts
- China's exports rose 19.4% year-on-year in May, exceeding economists' expectations.
- Imports increased by 27.4% in May, also surpassing forecasts.
- The strong export performance was driven by front-loaded orders and robust demand for semiconductors and AI hardware.
- China's trade surplus widened to $105.43 billion in May.
- Separate factory activity data showed a steep drop in new export orders in May compared to April's peak.
China's export growth accelerated significantly in May, expanding by 19.4% year-on-year in U.S. dollar terms, surpassing the 14.1% growth recorded in April and exceeding economists' forecasts. This surge was primarily attributed to overseas buyers front-loading orders to preempt potential energy cost increases related to the Middle East conflict, alongside sustained global demand for semiconductors and AI hardware. Imports also demonstrated strong performance, climbing 27.4% compared to a 25.3% rise in April, indicating continued demand for foreign goods. Consequently, China's trade surplus widened considerably to $105.43 billion in May, up from $84.8 billion in the previous month and exceeding projections.
However, signs suggest this export momentum may be temporary. Separate factory activity data for May indicated a sharp decline in new export orders from April's two-year peak, suggesting that the front-loading effect might be fading as stockpiling reaches its limit. Economists caution that the current buffer is temporary and that rising costs and inventory levels could impact future shipments.
The strong export performance contributed to China's economy exceeding forecasts in the first quarter, but a subsequent slowdown in momentum has raised concerns about the nation's reliance on external demand amid fragile domestic consumption. Beijing faces international pressure to bolster domestic consumption, with critics arguing that its model of importing inputs and re-exporting finished goods distorts trade and disadvantages other emerging economies. The OECD noted that nearly 60% of Chinese firms' market share gains are linked to subsidies, and a U.S. Federal Reserve paper highlighted that China's trade surplus relative to global GDP has reached unprecedented levels, suggesting persistent industrial overcapacity that could reshape global manufacturing.
A recent meeting between U.S. President Donald Trump and President Xi Jinping aimed to ease trade tensions but yielded no significant breakthroughs on tariff disputes or cooperation regarding the Iran conflict.