South China Morning Post reported that official trade figures have triggered fresh doubts about the stability of Chinese economic growth with a surprising drop in imports last month signaling weakness in domestic demand.
Data showed that imports fell 1.6% in May from a year ago. It was seen as a troubling development despite a 7% YoY surge in exports that came on the heels of a tepid 0.9% increase in April.
Mr Xu Gao chief economist of Everbright Securities said that “It suggests that the outlook remains murky.”
Mr Liu Li gang chief economist for Greater China at ANZ Bank attributed the weak import numbers to a recent crackdown on using commodities as collateral to finance business deals. Mr Liu said that “China’s commercial banks will likely further tighten rules in the commodity financing business, which will pose significant pressure on imports going forward. Weak import growth would keep the yuan under pressure in the coming months.”
Mr Zhang Zhiwei chief China economist for Nomura said that while Beijing’s measures had probably halted a further weakening of domestic demand, a slowdown in the property market would weigh on economic growth into next year. Mr Zhang who last week raised his forecast for growth this year to 7.5% from 7.4% said that “We do not believe the recovery is sustainable in the medium term and continue to forecast a growth slowdown to 6.8% in 2015.”
Economists had expected a steady rise in imports after indications that government efforts to stabilise stuttering growth had taken effect. A string of measures were introduced after growth fell to an 18 month low of 7.4% in the first three months of this year. The effect of those measures was seen in the official Purchasing Managers Index survey for last month. A drop in inventories in both finished goods and raw materials suggested companies had drawn down stocks to meet rising orders.
Data from the General Administration of Customs showed that exports totaled USD 195.47 billion last month. Imports were USD 159.55 billion, pushing the trade surplus out to USD 35.92 billion from USD 18.5 billon in April. Total trade volume in the first five months of this year saw YoY increase of 0.2% to USD 1.68 trillion.
Source – Scmp.com