Foreign demand for Chinese goods cooled off in May, a sign that the coronavirus-driven global slowdown is weighing on the world’s second-largest economy even as it reports stronger business activity at home.
At the same time, a plunge in global commodity prices has prompted Beijing to buy up strategic resources such as crude oil as tensions rise with the US, the new figures denominated in renminbi from the country’s customs authority suggest.
The slowdown is fuelled by lukewarm demand from China’s trading partners. South-east Asia, the top buyer of Chinese goods, reported a 1 per cent dip in imports from China last month following an 8 per cent increase in April, as a resurgence in the pandemic took a toll on local demand.
Exports to the US and Europe fell respectively 11 per cent and 1 per cent in the first five months of this year as western countries struggled to reopen their economies despite a drop in virus cases.
China’s exports overall rose just 1.4 per cent year on year last month following an 8.2 per cent jump in April and a 13.3 per cent drop in the first quarter.
Larry Hu, an economist at Macquarie Group in Hong Kong, said China’s exports could weaken further in the coming months given the slow pace of post-virus recovery among developed economies.
“Don’t expect a sharp rebound in foreign trade when the rest of the world faces the threat of a prolonged recession,” said Mr Hu.
China’s imports of crude oil and soyabeans surged 21 per cent and 28 per cent respectively last month from a year earlier. The average purchase prices of the two materials dropped 21 per cent and 2 per cent from the previous month.
Bo Zhuang, an analyst at TS Lombard, said the binge underscored Beijing’s efforts to prepare for an escalating stand-off with the US.
“China wants to fill up its oil tanks and soyabean warehouses in case it couldn’t import these materials freely,” said Mr Zhuang.
There are some more optimistic signs in China’s import sector, however. While the nation reported a 13 per cent decrease in foreign goods purchases last month, the situation is stronger for commodities.
Customs data show China’s imports of iron ore and copper, measured by volume, grew 3.5 per cent and 21 per cent last month as government-backed infrastructure construction, where the two materials are key ingredients, picked up pace.
“China’s building activity has made a full recovery while other parts of the economy are still in the woods,” said Mr Hu, who expected the raw material import boom to continue into the third quarter.