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CHINA’S FOREIGN TRADE SLUMPS IN MAY 2023

The latest import and export data released by China’s General Administration of Customs has raised concerns about China’s economic recovery from pandemic-era damage. In addition to the continued substantial increase in exports to Russia, China’s exports to ASEAN, the European Union, the United States, Japan, Africa, and Latin America all falter strikingly in May 2023. Inflation, high-interest rates, and soaring energy prices are all pressure that worsens the foreign demand to buy “Made in China.”

The weakness in global demand for goods has hampered China’s foreign trade and triggered a sharp drop in China’s exports. As of June 7, 2023, the latest statistics released by the General Administration of Customs of China show that China’s imports and exports in May 2023 were 501.19 billion US dollars, a year-on-year decrease of 6.2%. Among them, exports were $283.5 billion, down 7.5%; imports were $217.69 billion, down 4.5%; trade surplus was $65.81 billion, down 16.1%.

In April, China’s exports grew by 8.5% year-on-year. However, in May, a month later, there was a sharp drop. The latest import and export statistics have added to concerns about China’s economic recovery this year.

In May of this year, only China’s exports to Russia continued to increase, increasing by 114.3%, and imports increased by 10.1% year-on-year. Since Russia invaded Ukraine last February, China has steadfastly supported Russian President Vladimir Putin and has never expressed condemnation of Russia’s invasion.

In May, China’s imports fell for two consecutive months. While the 4.5% drop was smaller than experts had expected, it was notable. Deutsche Presse Agentur pointed out that this shows that China’s domestic market demand is still weak and dampened.

In dollar terms, China’s exports to ASEAN fell 15.9% year-on-year in May, the first decline since May 2020.

China’s imports from Germany fell by 3.8%, and its exports to Germany fell by as much as 8.3%. As China’s second-largest trading partner, the EU’s import and export volume with China is also decreasing. In May, China’s exports to the EU fell by 7%, while imports fell slightly by 0.9%.

China’s imports and exports to the United States and Japan are also declining. In dollar terms, China’s exports to the US fell 18% year-on-year in May, while imports from the US fell 9.8% year-on-year. Elsewhere, exports to Africa fell to 12.9% from 49.9% in April, while exports to Latin America fell to -1.1% from 10.5%.

China’s foreign trade data for May cast a shadow over expectations for China’s economic growth this year. After China abandoned the “zero-COVID policy” at the end of last year, the economic trend at the beginning of this year showed an optimistic trend. Beijing has set a growth target of around 5% for this year’s economic growth. The economy grew by 4.5% in the first quarter of this year.

The main reason for the sharp drop in China’s exports is the continued weakness in foreign demand. High inflation, rising bank interest rates, and soaring energy prices due to the Ukraine war are all factors that may contribute to the weakened foreign demand for goods from China. In the first five months of this year, China’s total import and export value was 2.44 trillion US dollars, a decrease of 2.8%, of which the single-month decline in May was 6.2%. 

Some observers have speculated that the central bank of the People’s Republic of China may cut the reserve requirement ratio to boost economic recovery. There are also some opinions that the central bank may soon release a policy message of cutting interest rates.

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