Demand for Chinese exports holds up better-than-expected in May

Foreign demand for Chinese exports held up better than expected last month as did domestic appetite for wares from abroad, although some economists believed strength in imports was unlikely to be sustained.

Combined, those opposing forces resulted in a smaller-than-expected increase in the Asian giant's trade surplus, from 262bn yuan in April to 282bn for May.

Export growth accelerated from a 14.3% year-on-year pace in the month before to a 15.5% clip for May (consensus: 13.5%) in yuan terms.

The unexpected result was partly due to rising prices, according to Julian Evans-Pritchard at Capital Economics, with the rate of growth in export volumes accelerating by less, from a 7.0% year-on-year clip to 7.6%.

Nonetheless, while slower than the rate of growth in volumes of 9.6% observed over the first three months of the year, that was still a "strong performance relative to recent years," Evans-Pritchard said.

"In seasonally adjusted level terms, export values and volumes are both near record highs. The upshot is that foreign demand for Chinese goods remains strong," he said.

Import growth also beat forecasts, rising by 22.1% after expanding by 18.6% in April (consensus: 16.1%).

Capital Economics was "surprised" by the strength of imports, given the backdrop of falling commodity prices.

Import volumes rebounded from a 4.5% pace in April to 8.5% last month, the same economist said.

"Looking ahead, the current strength of imports is unlikely to be sustained if, as we expect, slower credit growth feeds through into weaker economic activity in the coming quarters."