China’s trade growth rebounded in May, official data showed Thursday, as factories restarted and logistics snags eased after anti-coronavirus restrictions that shut down Shanghai and other industrial centers began to ease.
Exports grew at a double-digit pace, shattering expectations in an encouraging sign for the world’s second-biggest economy, while imports expanded for the first time in three months. The data provided welcome relief to Chinese policymakers 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.
Exports surged 16.9% over a year ago to $308.3 billion in May, up from April’s 3.7% growth, a customs agency statement said Thursday.
Imports rose 4.1% to $229.5 billion, the first gain in three months, driven by easing logistics bottlenecks and imports of raw materials and intermediate goods as domestic production resumed.
Nonetheless, the outlook for China’s exports, closely watched by investors as a gauge of world economic health, still points to risks from a monthslong 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.
“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.
Zheng Houcheng, director of the Yingda Securities Research Institute, said imports, although beating forecasts, still reflected sluggish domestic demand.
China’s trade has been dampened this year by weak export demand and curbs imposed to fight outbreaks in Shanghai, the site of the world’s busiest port, and other cities. Consumer demand for imports was crushed by rules that confined millions of families to their homes.
“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.
Forecasters have cut estimates for China’s economic growth to as low as 2% this year due to the Shanghai shutdown, well below the ruling Communist Party’s target of 5.5%. Some expect activity to shrink in the quarter ending in June before a gradual recovery begins.
Most factories, shops and other businesses in Shanghai, Beijing and other cities have been allowed to reopen but are expected to need weeks or months to return to normal activity levels.
Still, parts of Shanghai began imposing new lockdown restrictions on Thursday, with residents of the sprawling Minhang district ordered to stay home for two days in a bid to control COVID-19 transmission risks.
Home to more than 2 million people, Minhang will conduct nucleic acid tests for all residents on Saturday, and restrictions will be lifted once the testing is completed, the government said on its WeChat account.
“Exports showed considerable resilience in May despite the impact of the protracted lockdown in Shanghai,” said Rajiv Biswas of S&P Global Market Intelligence in a report. “The outlook for the second half of 2022 is for a stronger rebound in imports as domestic demand recovers.”
China’s politically sensitive global trade surplus widened by 82.3% over a year earlier to $78.8 billion. That was among the highest monthly trade gaps but below December’s record $94.4 billion. The country reported a $51.12 billion surplus in April.
China’s “zero-COVID-19” strategy that confined Shanghai’s 25 million people to their homes starting in late March helped to keep case numbers low but disrupted manufacturing and trade and crushed consumer demand.
The Port of Shanghai says the number of cargo containers handled each day returned to 95% of normal by late May. However, a backlog of tens of thousands of containers is likely to cause delays that will be felt around the world.
Import figures got a boost from higher global prices for oil and other commodities while the volume of foreign goods bought grew less strongly.
Authorities responded to complaints about the soaring cost of “zero-COVID” by switching to a more targeted approach of isolating buildings or neighborhoods with cases instead of cities. But some areas covered by restrictions that have closed shops, factories and offices for weeks at a time have millions of inhabitants.
China’s economy grew by a weak 4.8% over a year earlier in the quarter ending in March. That was an improvement over the 4% rate in the final three months of 2021, but the current quarter's economic indicators in the current quarter are dismal.
Auto sales in April fell by almost half from a year earlier. Retail spending was off by a worse-than-forecast 11%.
The ruling party is trying to shore up growth with tax refunds to entrepreneurs, easier credit and spending on building public works. The World Bank warned this week that the “old playbook” policies might delay efforts to encourage growth based on consumption instead of debt-fueled investment.
High debts “store up further risks down the line,” the bank’s chief China economist, Ibrahim Chowdhury, said in a statement.
As Shanghai reopens, many factories plan to split workforces into two groups, with only one on the job at any time, to limit disruptions if there are more outbreaks and quarantines, according to foreign business groups.
“It will be months at least, and possibly years, before all the people who were working get back to work,” Carl B. Weinberg of High-Frequency Economics said in a report this week.
