Growth in Chinese exports fell sharply last month, but that's not all bad news, according to analysts.
They said the government's crackdown on fake invoices had helped produce a more accurate picture of the mainland's imports and exports as weak global demand continues to weigh on the world's second-largest economy.
Exports in May rose by 1 per cent to US$182.8 billion from the same month last year, according to customs data released yesterday. The growth was far below the 14.7 per cent increase in April and also well below the 7.4 per cent estimate of economists polled by Bloomberg.
Imports in May were down 0.3 per cent year on year. The trade surplus widened to US$20.4 billion from US$18.2 billion in April. Premier Li Keqiang said China had maintained relatively high but reasonable growth so far this year, meaning a package of economic stimulus measures was unlikely in the near future.
He told an economic conference in Hebei yesterday the government would support economic development through "activating" existing credit. Li reiterated the importance of encouraging private investment.
The strong export growth reported in the first four months of this year despite lingering weakness in the global economy was greeted with scepticism by economists. In particular, they said exports to Hong Kong were inflated.
Growth in mainland exports to Hong Kong plunged to 7.7 per cent in May, from 57.2 per cent in April and 69.2 per cent in the first four months of this year.
Besides a sharp fall in growth in exports to Hong Kong, growth in exports to bonded customs area also dropped to 45.8 per cent in May from 249.4 per cent in April. Some believe mainland exporters drew in hot money by overstating export payments. They moved goods in and out of Hong Kong and bonded custom areas on the mainland, taking advantage of the higher interest rates offered on the mainland, these observers said.
Lu Ting , an economist at Bank of America Merrill Lynch, said the May trade figures showed weak but true external demand after the government's efforts to curb hot money flows and arbitrage trade.
"It seems that these measures have greatly reduced fake trades," he said. "These channels for hot money inflows were hit heavily by the regulatory storm in May."
Zhao Xijun , a finance professor at Renmin University in Beijing, said: "The figures in May were weak but revealed a truer picture after regulators' move to curb fake trade deals."
He said the sluggish global economy continued to weigh on exports, while the appreciation of the yuan against the US dollar and yen also put pressure on Chinese exporters.
Zhao said exports were unlikely to improve significantly in the second half of the year because of the weakness in global demand as well as brewing trade disputes with the European Union. Bilateral trade between China and the EU was US$214.4 billion in May, down 2.8 per cent.