BEIJING, June 8 (Reuters) – China’s export growth likely strengthened in May, underpinned by a backlog of overseas orders brought forward to pre-empt energy price pressures tied to the Gulf war, alongside sustained global demand for semiconductors and AI-related components.
Exports from the world’s second-largest economy are forecast to have risen 15% year-on-year in dollar terms, according to 32 economists in a Reuters poll, up from the 14.1% growth recorded in April.
The Middle East conflict has yet to dent China’s exports, policymakers’ preferred growth driver, but economists say it’s only a matter of time. As foreign buyers’ stockpiling peaks, the benefits of front-loading orders fade and input costs rise, prompting buyers to run down inventories and wait out a ceasefire.
Economists were divided on the health of China’s outbound shipments last month. China Industrial Securities, Huachuang Securities and Zheshang Securities returned the lowest forecasts of around 10% growth, while the Economist Intelligence Unit and JP Morgan predicted exports growth to slip to about 12%. ING returned the highest forecast of a 19.5% jump.
Separate factory activity data for May showed a sharp month-on-month drop in new export orders after they hit a two-year high in April, when warehouse managers described business as “booming” amid a scramble by foreign factories to lock in supplies ahead of potential price hikes, suggesting the front-loading may be fading.
Strong exports helped propel the $20 trillion economy past expectations in the first quarter, but momentum has since cooled, reinforcing economists’ concerns that weak domestic demand leaves China exposed if external conditions soften, raising the prospect of further policy support.
Imports are forecast to have risen by 25%, roughly in line with April’s 25.3% pace. South Korea’s exports, a key gauge of China’s demand, surged 80.9% in June, powered by semiconductors and tech parts used in China’s manufacturing supply chain.
But Chinese officials are facing increasing international pressure to boost domestic consumption. Critics argue Beijing is leaning too heavily on importing components and re-exporting finished goods at the expense of boosting domestic consumption, a model that risks squeezing other emerging economies out of higher-value manufacturing.
The Organisation for Economic Cooperation and Development amplified that concern last week, noting in a report that nearly 60% of Chinese firms’ “market share gains can be explained by subsidies received.”
A new U.S. Federal Reserve paper found that China’s trade surplus – measured against global GDP – has topped 1%, well above the peaks Japan and Germany hit in the late 20th century, and shows little sign of narrowing. That suggests persistent Chinese industrial overcapacity will reshape global manufacturing for years.
A closely watched meeting last month between U.S. President Donald Trump and President Xi Jinping helped cool tensions but produced no meaningful breakthroughs, whether on tariff disputes or cooperation over ending the Iran conflict.
China’s trade surplus is forecast to come in at $92.1 billion in May, up from $84.8 billion a month prior and from $51.3 billion in March.
(Reporting by Joe Cash; Polling by Pulkit Khanna and Susobhan Sarkar in Bengaluru and Jing Wang in Shanghai; Editing by Shri Navaratnam)
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