Wary applause as China's trade soars in May
China's exports and imports increased sharply in May but economists said the encouraging data did not signal a turnaround for the slowing economy.
Exports climbed 15.3 per cent year on year to a record US$181 billion, the General Administration of Customs said. Imports rose 12.7 per cent to US$162.4 the same month. These compare with a paltry 4.9 per cent increase in exports and 0.3 per cent rise in imports in April.
Trade with the United States jumped 12 per cent to US$190 billion, while trade with Europe rose just 1.3 per cent to US$220.8 billion.
'The data is better than expected, but not really a surprise,' said Dr Liao Qun, chief economist of Citic Bank International.
According to Liao, export and import figures are lagging indicators, as these figures reflect the situation six months ago rather than that of the month in question.
Overall data had been weak in the first quarter. But the global economy started picking up after the third quarter of last year, which was reflected in the May figures, Liao said.
The economist said he expected export and import data in the next few months to be 'quite good', but could slow down again in September as the Greek economy continued to sink irreversibly.
Zhang Yansheng of the National Development and Reform Commission, the country's top economic planning agency, said the better-than-expected trade data did not mean that the fundamental economic trend in China had changed, saying China still faced rising costs and increasing trade frictions with other nations.
'The April figures were downbeat while the May figures are very encouraging,' he said. 'However, for the global economy - especially in Europe, the US and Japan - problems refuse to go away.'
Problems such as unemployment that are confronting Europe, the US and Japan are all short-term, Zhang said, while China's challenge - how to upgrade the country's economic growth model - is long-term.
China's inflation in May was a lower-than-estimated 3 per cent, and producer prices dropped for a third straight month. For the first time in three years, industrial production growth was below 10 per cent for the second month in a row.
China has been trying to move up the value chain from being the factory to the world, a model that served it well in the past 30 years and moved millions out of poverty. However, that development model has hit a bottleneck as labour costs rise and pollution spreads.
Overreliance on exports has proved dangerous for China, which was evident during the 2008 financial crisis. Beijing was forced to launch a 4 trillion yuan (HK$4.54 trillion) stimulus package to bolster growth as the global economy sank into recession. The package helped China escape unscathed from the crisis but left a legacy of inflation, which Beijing is still grappling with.
The global economy is again teetering on the brink of a crisis. Premier Wen Jiabao last month said greater priority should be given to growth, which slowed to 8.1 per cent in the first quarter year on year, the slowest pace in nearly three years.
The central bank last week cut interest rates for the first time in more than three years in a bid to spur growth. Authorities have also been easing the monetary policy, cutting banks' reserve requirement ratios three times since December.
Value of trade last month - in US dollars - between world No 1 economy US and China, which is the world's top exporter