UOB Group Economist Ho Woei Chen, CFA, comments on China’s latest trade balance figures.
Key points to remember
“In USD terms, Chinese exports rose 16.9%y/y (Bloomberg estimate: 8.0%y/y; April: 3.9%y/y) in May and although imports also beat expectations, outperformance was less as it rose by 4.1%y/y (Bloomberg est: 2.8%y/y; April: 0.0%y/y).
“A stronger than expected rebound in Chinese trade in May confirms that the economy has bottomed out and we should expect the recovery to continue in June as Shanghai’s easing of COVID measures will temporarily boost trade flows. “.
“However, the high basis for comparison and growing headwinds to global economic growth due to factors such as higher commodity prices and an acceleration of central bank tightening as well as logistical challenges, are expected to lead to a moderation in China’s trade growth in 2H22 Domestically, there are also fears of a recurrence of widespread COVID lockdowns as China maintains its aggressive zero COVID policy, which could encourage further diversification of the supply chain. supply to the ASEAN region.
“The main upside of the outlook is a potential drop in Trump-era tariffs on $300 billion worth of Chinese goods as the Biden administration seeks to ease inflationary pressures in the United States.”
