China’s Export Gains to Cushion Growth as Imports Slump

China’s exports rose more than analysts estimated in May, helping to cushion the world’s second-biggest economy from a deeper slowdown as an unexpected slump in imports highlighted risks to growth.

Overseas shipments gained 7 percent from a year earlier, the customs administration said on 7 June in Beijing. Imports fell 1.6 percent, leaving a $35.92 billion trade surplus, the biggest in five years.

Stronger exports may bolster Chinese leaders’ confidence that a recovery in demand from the U.S. and Europe will support economic growth and reduce the need for stronger stimulus. On June 6, Premier Li Keqiang told officials from eight places, including Beijing, Guangdong, Zhejiang and Hebei, to be proactive in supporting their local economies, saying the government wants a “reasonable” rate of expansion.

“The export figures are positive news for policy makers and we expect continued solid export growth in the coming months amidst gradually improving global demand momentum,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong. “The import data suggest a pretty subdued state of the domestic economy though and the dilemma for the government is how to balance the need to reduce growth in leverage with all the calls for support.”

Economic Support

The government has announced a series of targeted policies to support the economy after growth slowed to 7.4 percent in the first quarter from a year earlier, the weakest pace since 2012 and below the government’s full-year goal of about 7.5 percent. Expansion may ease to 7.3 percent this year from 7.7 percent in 2013.

Measures have included help for exporters, tax cuts, accelerated investment in public housing and infrastructure, faster fiscal spending and a reduction in reserve requirements for some banks to spur lending to targeted sectors.

U.S., Europe

In the U.S., China’s biggest export market, hiring increased by more than 200,000 for the fourth consecutive month in May, and service industries expanded at the fastest pace in nine months, reports showed last week, signaling a broad-based rebound in the economy. The European Central Bank on June 5 announced a cut in deposit rates to minus 0.1 percent to stimulate demand.

The increase in exports last month followed an unexpected gain of 0.9 percent in April after two months of declines.

China’s steel exports have surged amid a domestic operating environment that Baoshan Iron & Steel Co. Chairman He Wenbo said in April is the harshest ever. Overseas shipments by Tangshan Iron and Steel Co. surged 35.5 percent in April from a year earlier and rose 39 percent in the first quarter, data from its parent Hebei Iron and Steel Co. show.