May exports grow better than expected

China's exports grew better than expected in May, with analysts pointing to improved external demand and strong resilience in foreign trade, providing a solid base for achieving its annual economic target. 

Despite challenges in the global economic climate, they expected to see robust export growth this year — a key driver for economic growth stabilization, saying the successful implementation of the ongoing supportive policies will help tackle structural issues and prop up the world's second-largest economy.

Their comments came as data from the General Administration of Customs showed on Friday that exports last month rose 7.6 percent from a year earlier to $302 billion, marking a significant improvement from the 1.5 percent rise in April. Imports, meanwhile, rose 1.8 percent to $220 billion in May, down from an 8.4 percent gain in April.

For the January-May period, China's foreign trade expanded 2.8 percent to $2.46 trillion, while its exports rose 2.7 percent to $1.4 trillion.

Zhou Maohua, a researcher at China Everbright Bank, said that China's export growth beat expectations due to the continued recovery of overseas demand, optimization of China's foreign trade structure, increased support for policies promoting domestic demand and stabilizing foreign trade, and rapid growth in exports of new energy and high-tech equipment manufacturing.

"China's foreign trade growth is gaining a firmer footing with resilient export growth, which will be a key driver of economic stabilization in the second quarter and lay a solid base for achieving an annual growth target of around 5 percent this year," he said.

Zhou's views were echoed by Robin Xing, chief China economist at Morgan Stanley, who said that resilient exports and manufacturing capex are likely to be the key growth drivers this year, backed by a global trade recovery and a policy push to upgrade supply chains.

Xing said that China's export volume growth is likely to stay robust at 8 percent year-on-year in 2024, benefiting from global trade recovery.

Meanwhile, Xing said his team believes the latest United States tariff hike is more symbolic and is likely to have limited economic impact because the affected products only account for 0.5 percent of total exports.

"We, therefore, continue to expect strong exports this year — a key driver of our 4.8 percent real GDP growth forecast (for China) this year," he said.

Louise Loo, lead economist at British think tank Oxford Economics, said: "On the external front, despite rising tariff risks, our baseline incorporates a healthy 6.3 percent goods exports growth (in real terms) this year, which will likely contribute to a smaller, but still sizable, current account surplus of around 1.1 percent of GDP."

"If external demand conditions turn out to be weaker, we expect domestic policy stimulus to provide a buffer," she added.