China trade: coronavirus outbreak threatens temporary ‘shock’ after May figures fell short of expectations
A coronavirus outbreak in southern China looks to have a “transitory shock” on trade this month after exports fell short of expectations in May despite hitting a 10-year high.
Concerns have been raised about how the recent outbreak will affect traffic at Shenzhen’s Yantian port and Nansha port in Guangzhou, which are among the world’s busiest container ports.
Officials at Nansha port insisted on Monday that operations were “running normally”, though truck drivers were being required to have booked in advance, to undergo a temperature check, and to present a green health code upon arrival showing that they were allowed to travel freely.
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“Exports surprised a bit on the downside, maybe due to coronavirus cases in Guangdong province slowing down the turnover at the Shenzhen and Guangzhou ports,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management. “But I expect this shock to be transitory.”
He noted that Guangdong province accounts for around 24 per cent of China’s total exports. Over the weekend, the government stepped up its policies to curb the coronavirus risk in Guangdong.
China’s exports grew by 27.9 per cent last month from a year earlier to $263.9 billion, down from the 32.3 per cent growth seen in April. The May figure was also below the result of the Bloomberg survey, which had predicted 32 per cent growth.
Meanwhile, after China’s import growth of 51.1 per cent in May from a year earlier was slightly lower than the median result of a survey of analysts conducted by Bloomberg which predicted 54.5 per cent growth analysts suggested that this could be an early indicator of the problems that lie ahead this month before an expected recovery in July.
However, the rise in imports reflects an increase not in volume, but in value, which could have been inflated due to much higher commodity prices last month.
Nomura chief China economist Lu Ting noted that the import increase was “thanks mainly to rising global commodity prices, strong yuan appreciation and restocking demand due to rising raw materials prices”.
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For exports, it was the 11th consecutive period of growth. But again, the export drop of 3.3 per cent in May last year means the latest figures also started from a low base.
“I think the risk of a supply-chain disruption is rising, and export prices/shipping costs will likely rise further. Guangdong province plays a critical role in the global supply chain,” Zhang said. “Turnover in Guangdong ports will likely remain slow in June. Other ports in China will likely become more cautious as well.
“Compounded by the pandemic in India and Southeast Asian economies, the ship shortage, the rising commodity and shipping costs, this rise of Covid cases in Guangdong may contribute to higher inflationary pressure in other countries.”
China’s imports in May, valued at $218.4 billion, grew for the eighth consecutive period and marked the fastest import growth since January 2011, but the fact that imports fell by 16.7 per cent in May last year due to the impact of the coronavirus is a factor in the size of the increase this year. However, the impact of the base level appears to be fading, with China’s total imports in May being 1.2 per cent less than they were in April.
“Since the end of May, there have been around 10 coronavirus cases daily in Guangdong, where most electronics factories are located,” said Iris Pang, the chief economist for Greater China at ING.
“Shipments from the port in Shenzhen that process most of the electronics throughput have been affected by the coronavirus. Port workers now have to have Covid tests, and port operations have been disrupted. Some factories in Guangdong were also affected by the coronavirus, mostly caused by workers queuing up for testing.
“As such, we expect that June’s trade and production data will be affected. This could push up prices of electronic goods in general and affect China’s export prices and eventually import prices in the US and Europe. Supply chains in Asia will also likely be disrupted.”
China’s total trade surplus stood at $45.53 billion in May, compared with $42.85 billion in April.
Also last month, China’s often scrutinised trade surplus with the United States rose to $31.78 billion from $28.11 billion in April.
China’s imports from the US rose by 40.53 per cent to $13.11 billion in May, while exports rose by 20.6 per cent to $44.89 billion.
On Saturday, US Trade Representative Katherine Tai said that the trade relationship between the two largest economies in the world has a “significant imbalance”, and that the Biden administration is committed to levelling it.
The Association of Southeast Asian Nations (Asean) remained China’s largest trading partner last month, followed by the European Union and the US.
China’s exports to Asean members rose by 40.59 per cent to $39.19 billion in May compared with a year earlier, while imports from the 10-member economic union rose by 53.77 per cent to $33.13 billion.
This is not a CAPTIS article. Originally, it was published here.