Trade data released by the Chinese National Bureau of Statistics on Monday revealed that Chinese imports grew at their fastest pace in a decade in May.
Chinese imports grew 51.1% on an annual basis, a solid leap from the 43.1% figure recorded in April. The growth was the fastest since January 2011. However, May’s figure was still lower than the market expectations for a 51.1% increase.
The growth in imports was due to the recent surge in commodity prices as global demand soared for raw materials.
Chinese Exports Disappoint
Whilst Chinese imports grew the most in a decade, Chinese exports disappointed. Although China’s exports in dollar terms grew 27.9% last month on an annual basis, May’s figure was slower than the 32.3% growth recorded in April and below market expectations for growth of 32.1%.
The sharp recovery in developed markets has fueled demand for Chinese products. However, there are issues for China. A worldwide semiconductor shortage, higher-priced raw materials and increased transportation costs and bottlenecks, as well as a strengthening yuan, have all helped to dim the outlook somewhat for the world’s second-largest economy and world’s largest exporting nation.
Zhiwei Zhang, chief economist at Pinpoint Asset Management said of the latest Chinese data:
“Exports surprised a bit on the downside, maybe due to the COVID cases in Guangdong province which slowed down the turnover in Shenzhen and Guangzhou ports,”
The Yuan Problem
A growing concern for China is the strength of its currency in the forex markets. The Chinese yuan has recently extended a rally that saw it almost hit a three-year high against the US dollar. Although the Chinese currency’s strength has yet to impact China’s trade surplus, it could mean higher prices for U.S. consumers and less demand for Chinese products further down the road.
The U.S.-China trade policy is currently being reviewed by U.S. President Joe Biden’s administration ahead of a Phase One deal expiring at the end of this year.
