China’s foreign trade experienced slower growth than anticipated in May, affected by factors such as geopolitical tensions and a sluggish global economy, resulting in subdued global demand. Experts are urging increased policy support to stabilize the country’s export growth and address concerns among businesses.
Given the gloomy global economic outlook and the expected weakening of external demand, China’s foreign trade is expected to face pressure. Experts emphasized the need for ongoing government support to sustain stable growth and alleviate the challenges ahead.
In May, China’s foreign trade expanded by 0.5 percent, reaching 3.45 trillion yuan ($485 billion). However, exports declined by 0.8 percent year-on-year, amounting to 1.95 trillion yuan, while imports increased by 2.3 percent, reaching 1.5 trillion yuan, as reported by the General Administration of Customs.
Zhou Maohua, an analyst at China Everbright Bank, attributed the modest drop in exports to a relatively high base figure recorded during the same period last year. Additionally, after fulfilling a backlog of orders that were disrupted by the pandemic in recent months, domestic exporters faced inadequate market demand, leading to the decline.
The world economy and global trade have been negatively impacted by the Russia-Ukraine conflict, persistent high inflation, and tighter monetary policies. Zhou stated that the shrinking external demand will continue to hamper China’s foreign trade for some time, indicating that the foundation for recovery has not yet been fully established. Therefore, further supportive policies are necessary to tackle various challenges and ensure stable growth.
Xu Hongcai, deputy director of the economic policy committee at the China Association of Policy Science, emphasized the importance of leveraging the diversification of international markets to mitigate the dampening demand from countries like the United States and Japan.
According to the General Administration of Customs, China’s total imports and exports grew by 4.7 percent year-on-year to 16.77 trillion yuan between January and May. The Association of Southeast Asian Nations (ASEAN) remained China’s largest trading partner, with a trade volume of 2.59 trillion yuan, representing a 9.9 percent year-on-year increase. Additionally, China’s trade with countries and regions involved in the Belt and Road Initiative (BRI) expanded by 13.2 percent year-on-year, reaching 5.78 trillion yuan.
Xu highlighted that countries involved in the BRI and ASEAN member states are emerging as new growth engines for China’s foreign trade. Further steps should be taken to unlock their trade potential, including leveraging the Regional Comprehensive Economic Partnership and its preferential tax rates to expand the market in Southeast Asia.
Zhou from China Everbright Bank emphasized the role of high-end manufacturing industries, particularly automobile exports, in facilitating stable growth in China’s foreign trade. Between January and May, China’s mechanical and electrical product exports grew by 9.5 percent year-on-year to 5.57 trillion yuan. Notably, automobile exports amounted to 266.78 billion yuan, representing a significant 124.1 percent year-on-year increase.
To secure more orders and provide higher value-added products, domestic manufacturers should stay attuned to shifting global market demands and invest in innovation and production capacity, Zhou recommended.
Zhang Jianping, head of the Center for Regional Economic Cooperation at the Chinese Academy of International Trade and Economic Cooperation, called for improved policies to enhance foreign trade facilitation, reduce overall business costs, and improve competitiveness. This includes providing inclusive financing services, implementing deeper tax and fee cuts, and expanding the coverage of export credit insurance. Industry associations and chambers of commerce should also play a vital role in assisting firms in securing more orders.