Chinese imports slump as Covid-19 continues to weigh heavily

China’s economy continued to struggle in May as the Covid-19 pandemic caused global demand to slump and weighed heavily on imports.

According to official customs data released over the weekend, overseas shipments fell 3.3% in May compared to the same month a year previously. The figure was also down on April’s surprise 3.5% increase.

It was, however, better than forecast, with most analysts looking for exports to decline by around 7%. The improvement was largely attributed to strong demand around the world for medical supplies.

The trade surplus was also well above forecast, coming in at $62.9bn compared to $45.3bn in April.

But imports slumped 16.7% year-on-year, deeper than the 14.2% fall recorded a month earlier and the sharpest decline since January 2016.

Michael Hewson, chief market analyst at CMC Markets, said: “The latest China trade numbers for May offered a fresh perspective to events, as the country’s trade surplus surged to a record high amid the lowest imports number in four years, while exports were boosted by significant sales, as they were in April, of PPE and other medical equipment.

“Some of the decline in imports may well have been as a result of the lower US dollar value of commodities. However, it still spoke to an economy that is struggling to get back on its feet, three months after its lockdown in February.”

Russ Mould, investment director at AJ Bell, said the declines in both exports and imports implied “consumption is weak, and the country’s recovery efforts from the pandemic are still somewhat fragile”.

Miguel Chanco, senior Asia economist at Pantheon Macroeconomics, said: “May should mark the peak of China’s trade surplus.

“The signal from the manufacturing PMIs remains damning: new export orders haven’t risen month-on-month since the end of China’s lockdown. By contrast, the import bill should now continue to rise steadily, as global commodity prices mostly have bottomed out, and as Beijing catches up to its Phrase One trade deal commitments after an understandably slow start of the year for imports from the US.”