Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

China's exports surge on easing COVID curbs, trade outlook still fragile

Published 06/08/2022, 11:23 PM
Updated 06/09/2022, 07:31 AM
© Reuters. FILE PHOTO: A cargo ship carrying containers is seen near the Yantian port in Shenzhen, following the novel coronavirus disease (COVID-19) outbreak, Guangdong province, China May 17, 2020. REUTERS/Martin Pollard

© Reuters. FILE PHOTO: A cargo ship carrying containers is seen near the Yantian port in Shenzhen, following the novel coronavirus disease (COVID-19) outbreak, Guangdong province, China May 17, 2020. REUTERS/Martin Pollard

TSLA
-0.90%

BEIJING (Reuters) - China's exports grew at a double-digit pace in May, shattering expectations in an encouraging sign for the world's second biggest economy, as factories restarted and logistics snags eased after authorities relaxed some COVID curbs in Shanghai.

Imports also expanded for the first time in three months, providing welcome relief to Chinese policy makers as they try to chart an economic path out of the supply-side shock that has rocked global trade and financial markets in recent months.

Nonetheless, the outlook for China's exports, closely watched by investors as a gauge of world economic health, still points to risks from a months-long Ukraine war and rising raw material costs. Those same factors, along with rising interest rates in the United States and Europe, have raised concerns about a global recession.

Outbound shipments in May jumped 16.9% from a year earlier, the fastest growth since January this year, and more than double analysts' expectations for a 8.0% rise. Exports were up 3.9% in April.

"We believe this recovery can continue if there are no further lockdowns," said Iris Pang, Greater China chief economist at ING, adding the rebound in both exports and imports was mainly due to the port recovery in Shanghai in the last week of May.

Official data showed the daily container throughput at Shanghai port, which was running at severely reduced capacity in April, returned to 95.3% of the normal level in late May.

"If global demand continues to be as strong as it has been since 2021, China's exports should maintain an average annual growth rate of 15%, at least through 3Q22," Pang said.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

Economic activity cooled sharply in April as the country grappled with the worst COVID-19 outbreak since 2020. Stringent lockdown measures, sometimes excessively enforced by local officials, had clogged highways and ports, stranded workers and shut factories.

To stabilise the situation in a politically sensitive year, the State Council has called on local officials to revive supply chains, restore economic growth and rein in unemployment. Major automakers have been able to ramp up production in May and cargo handling capacity at ports and airports are returning closer to pre-lockdown level.

NOT OUT OF WOODS YET

Electric car maker Tesla (NASDAQ:TSLA) reopened its factory in Shanghai on April 19 after a 22-day stoppage, shipped the first batch of exports in early May and returned to pre-lockdown production levels in late May.

Official and private surveys showed China's factory activity contracted at a slower pace in May as COVID-19 curbs in major manufacturing hubs eased, with a gauge on export orders improving.

The United States is considering removing some of the tariffs imposed on Chinse goods to help alleviate mounting inflationary pressures, which would be a boon for Chinese exporters.

Thursday's data showed imports rose 4.1% in May from a year earlier, the first gain in three months, driven by easing logistics bottlenecks and imports of raw materials and intermediate goods as domestic production resumed.

That compared with flat growth in April and forecasts of a 2.0% rise.

Zheng Houcheng, director of the Yingda Securities Research Institute, said imports, although beating forecasts, still reflected sluggish domestic demand.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

China posted a trade surplus of $78.76 billion last month, versus a forecast for a $58 billion surplus in the poll. The country reported a $51.12 billion surplus in April.

China's cabinet recently announced a broad package of economic support measures, although analysts say the official GDP target of around 5.5% for this year will be hard to achieve without doing away with the zero-COVID strategy.

The central bank in May cut its benchmark reference rate for mortgages by an unexpectedly wide margin, its second reduction this year as Beijing seeks to revive the ailing housing sector to prop up the economy.

Chang Ran, a senior analyst at Zhixin Investment Research Institute, said the recent depreciation in the Chinese currency would also aid exports and help improve corporate earnings.

"However, after the bounce-back in May and June, the pressures facing exports are set to intensify in the second half this year due to base effects, high running global inflation and the policy tightening in major economies."

Should you invest $2,000 in TSLA right now?

Before you buy stock in TSLA, consider this: ProPicks AI are 6 easy-to-follow model portfolios created by Investing.com for building wealth by identifying winning stocks and letting them run. Over 150,000 paying members trust ProPicks to find new stocks to buy – driven by AI. The ProPicks AI algorithm has just identified the best stocks for investors to buy now. The stocks that made the cut could produce enormous returns in the coming years. Is TSLA one of them?

Reveal Undervalued Stocks Now

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.