China’s Exports Fall 7.5% In May, Adding To Stimulus Talk

China’s exports fell in May for the first time since February, data showed Wednesday, breaking a two-month growth streak as a post-Covid rebound faded and adding to speculation that officials will unveil fresh stimulus measures.

Rising global inflation, the threat of recession elsewhere and geopolitical tensions with the United States have weakened demand for Chinese products.

That resulted in overseas shipments sinking 7.5 percent on-year last month, Customs figures showed, marking a sharp drop from an increase of 8.5 percent in April and much steeper than the 1.8 percent forecast in a Bloomerg survey.

China’s exports grew in March and April, snapping a run of five straight declines, when production was disrupted by sweeping lockdowns and delays at ports when authorities enforced their strict zero-Covid policy.

And the Chinese economy expanded by 4.5 percent in the first quarter of the year.

But that recovery has lost steam, with the economy weighed down by a debt-laden property sector, limp consumer confidence and a global economic slowdown.

Meanwhile, imports fell 4.5 percent in May, a smaller decline than April’s 7.9 percent contraction but better than the 8.0 percent estimated.

The data are the latest to highlight weaknesses in the world’s number two economy, with manufacturing activity shrinking in May for the second successive month.

Reports said Wednesday that authorities have asked the country’s biggest banks to lower their deposit rates in a bid to boost the economy as it struggles. Analysts said such a move could indicate the People’s Bank of China was considering an interest rate cut as soon as this month.

The figures were “yet another disappointing data which will raise growth concerns and intensify expectations of more policy support”, Khoon Goh, at Australia & New Zealand Banking Group, said.

The country is also grappling with a new Covid-19 outbreak, but official data on the scale of it is scarce and there is little sign that containment policies will be reimposed.

Senior health adviser Zhong Nanshan said the current wave may peak at around 65 million infections per week by the end of June, state-backed Shanghai media outlet The Paper reported last month.

The property sector, which along with construction accounts for about a quarter of China’s gross domestic product, experienced its “worst-ever slump” last year, according to Beijing-based economic consultancy Gavekal-Dragonomics.

To revive a struggling industry, the government has pivoted away from its crackdown on debt toward a more conciliatory approach since November, with targeted support measures for the most financially sound developers.

Ting Lu, Nomura’s Chief China Economist, said in a note this week that analysts expected “more easing and stimulus measures”.

“Amid the deteriorating property sector, its potentially devastating impact on government finance and the rising risk of double-dip, we do not expect Beijing to sit idle,” Lu wrote.

May’s trade data suggests “subdued global demand for Chinese goods and supports our view that the robust export figures of the previous couple of months reflected distortions to the customs data rather than a turnaround in foreign demand”, Capital Economics analysts wrote in a note on Wednesday.

“We think exports will fall further before bottoming out later this year,” the analysts said.