China External Debt (% of GDP)

External Debt in China

Merchandise exports contract in May

Merchandise exports declined 7.5% year-on-year in May (April: +8.5% year-on-year). The reading was far below the 0.4% contraction that markets expected. Soft goods demand from developed markets, together with firms having worked through post-Lunar-New-Year order backlogs, largely explain the reading. However, the contraction in exports—which are reported in U.S. dollars—was exaggerated by the depreciation of the yuan in May. Exports fell to key markets such as the U.S., ASEAN, Japan and the EU. In contrast, shipments to Russia more than doubled year on year. Meanwhile, merchandise imports declined 4.5% over the same month last year in May (April: -7.9% yoy).

As a result, the merchandise trade balance deteriorated from the previous month, recording a USD 65.8 billion surplus in May (April 2023: USD 90.2 billion surplus; May 2022: USD 78.4 billion surplus). Lastly, the trend pointed down, with the 12-month trailing merchandise trade balance recording a USD 955.7 billion surplus in May, compared to the USD 968.3 billion surplus in April.

On the reading, DBS’ Ma Tieying said:

“The renewed decline in China’s exports […] suggests that the supply-side boost to the Chinese economy, due to the restoration of manufacturing work after the lifting of Covid controls, has started to wane. On the other hand, China’s manufacturing demand has not begun to pick up substantially even after reopening.”