China’s imports grew at their fastest pace in 10 years, fueled by surging demand for raw materials, although export growth slowed more than expected, weighed by the discovery of several coronavirus cases in southern China.
While a brisk recovery in developed markets has bolstered demand for Chinese products, a global semiconductor shortage, higher raw material and freight costs, logistics bottlenecks, and a strengthening yuan have dimmed the outlook for the world’s largest exporting nation.
China’s exports in dollar terms grew 27.9% in May from a year earlier, slower than the 32.3% growth reported in April and missing analysts’ forecast of 32.1%.
Major shipping companies warned clients of worsening congestion at Shenzhen’s Yantian port in Guangdong province after the discovery of several cases among port staff.
On the ground in Guangdong, factories have yet to report widespread capacity cuts over the outbreak but admitted efficiency issues as they tried to meet overseas demand.
Besides the impact of COVID cases in Guangdong, the global chip shortage has started to hit all of China’s export items related to semiconductors, said Iris Pang, Greater China chief economist at ING.
For example, autoprocessing products and parts, the biggest export item, fell 4% year-on-year, Pang added.
At the same time, the currency’s extended rally in recent weeks to near three-year highs against the dollar could further saddle U.S. consumers with higher prices.
Imports increased 51.1% year-on-year last month, the fastest growth since January 2011 and picking up from a 43.1% rise in April, but slower than the 51.5%.
China posted a trade surplus of US$45.53 billion for the month, wider than the US$42.86 billion surpluses in April but less than the US$50.5 billion expected.
Prices for commodities such as coal, steel, iron ore, and copper have surged this year, driven by easing pandemic lockdowns in many countries and ample global liquidity.
The Biden administration is conducting a review of U.S.-China trade policy, ahead of the expiry of their Phase 1 deal at the end of 2021 which called for China to increase purchases of U.S. agricultural goods, manufactured products.