Unexpected Gain in Chinese Exports Is Seen as Temporary

China’s exports unexpectedly rose in April
aided by stronger shipments to South East Asia, though with the
coronavirus pandemic damaging global demand that increase is
likely to be temporary. Imports fell.
Exports rose 3.5% in dollar terms in April from a year
earlier, while imports dropped 14.2%, the customs administration
said Thursday. Economists had forecast that exports would shrink
by 11% while imports would contract by 10%.
China’s exports usually start slowly in the first quarter
due to the Lunar New Year and then rise from April. While there
were some signs in March of a recovery from the domestic slump
at the peak of the outbreak, restrictions in other parts of the
world to contain the pandemic had been expected to weigh on
orders and disrupt supply chains, and the earliest indicators in
April showed the nascent rebound was already losing momentum.
“April shipments may have been boosted by exporters making
up for shortfalls in the first quarter due to supply constraints
then,” according to Louis Kuijs, head of Asia economics at
Oxford Economics Hong Kong Ltd. “As heralded by the weakness of
new export orders in the PMIs, exports should weaken
significantly in the near term as China’s key trading partners
fall into deep recession.”
The trade surplus was $45.3 billion in April, well above
the median forecast of $8.7 billion. As of noon in Beijing, the
customs administration had not released a detailed breakdown of
the data in dollar terms or for April alone.

What Bloomberg’s economists think

“The surprise increase in China’s exports in April reflects
a faster-than-anticipated recovery in production — not a sign
of reduced external pressure on the economy. Manufacturers were
probably continuing to catch up on orders made before the
pandemic struck. Once they get through the backlog, exports
should more clearly reflect the impact of the drop-off in
foreign demand.”
— See here for full report from David Qu, Bloomberg
economics
Export data in yuan terms indicated that a rise in
shipments to SE Asia drove the better-than-expected performance.
Shipments to Asean rose 3.9% in the first four months of the
year. Exports to the EU dropped 6.6%, while to the U.S. they
fell 15.9%.
The surprise increase in exports wasn’t uniform across Asia
– South Korea’s exports in April fell by over 24%, the biggest
drop since the global financial crisis, with shipments to all
destinations down sharply.
Almost 2.8 trillion yuan ($395 billion) worth of mechanical
and electrical goods were shipped from China in the first four
months, with more than 800 billion yuan of that just in April,
according to the data.
“As the volume of commodity imports actually rose, the
decline in imports was driven by falling commodity prices,” said
Raymond Yeung, chief China economist at Australia & New Zealand
Banking Group in Hong Kong. “April’s exports also reflected the
pent-up demand of previous export orders for electronic
products. Global work-from-home is also expected to be
contributory to certain consumer electronic products.
Nonetheless, this figure does not bode well for the US-China
trade relationship. Trump’s administration will certainly press
for more going forward.”

(Bloomberg) —