China's export sector is expected to show robust growth for the second consecutive month in May, driven by improving overseas demand. This positive trend offers a welcome boost for officials aiming to stabilize the country's economic recovery amid various domestic challenges.
Trade data set to be released on Friday is anticipated to reveal a 6.0% year-on-year increase in outbound shipments by value, according to the median forecast of 32 economists in a recent poll. This marks a significant rise from the 1.5% growth recorded in April.
Imports are also projected to have grown, albeit at a slower pace of 4.2% in May compared to the 8.4% gain seen in April.
Recent months have seen varied recovery speeds across different sectors of China's $18.6 trillion economy. While the first quarter showed stronger-than-expected growth and March’s export and output data indicated robust global demand, subsequent indicators have reflected softer domestic consumption.
Analysts identify the ongoing property crisis as a significant barrier to a full economic revival. Additionally, deflationary pressures persist, and potential tariffs from the U.S. and European Union pose risks to China’s export sector.
"Global demand is providing a stronger boost to China's economy than anticipated, and foreign tariffs are unlikely to significantly impact overall export performance in the near term," noted Julian Evans-Pritchard, head of China economics at Capital Economics. He now forecasts a 5.5% economic expansion for China this year.
The International Monetary Fund recently adjusted its growth forecast for China, raising it by 0.4 percentage points to 5% for 2024 and 4.5% for 2025. However, it cautioned that the property sector remains a critical risk to growth.
The anticipated trade data benefits from a lower base of comparison due to last year's rising interest rates and inflation in the U.S. and Europe, which had dampened external demand. Additionally, a global cyclical upturn in the electronics sector, evidenced by a 19-month high in South Korean exports to China, should further support Chinese exporters.
The median estimate in the poll predicts China’s trade surplus will rise to $73.0 billion, up from $72.35 billion in April.
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