China’s foreign trade regained momentum in May, thanks to a gradual lifting of sanitary restrictions in Shanghai that severely penalized activity. China’s economic capital, the country’s most cosmopolitan city, has been confined in stages since late March in response to a nationwide outbreak that has been the most virulent since 2020.
The total bell-ringing of the metropolis in April dealt a severe blow to local activity and weakened the growth of the world’s second largest economy. Thanks to its port, one of the largest in the world, Shanghai holds a strategic place in the supply chains. In May, exemptions allowed some companies to restart production.
As a result, China’s overseas sales rose + 16.9% year-on-year last month, according to Chinese Customs. Analysts polled by Bloomberg predicted a rebound but more modest (+ 8%), after a slump in April (+ 3.9%), then the lowest increase since 2020 for exports. China’s imports also rebounded in May (+ 4.1% year-on-year), after stagnating a month earlier. Analysts had also anticipated this recovery but more modestly (+ 2.3%).
Less robust demand for telecommuting equipment
With the gradual lifting of health restrictions, “logistics improved significantly in May” in the vast and vibrant region around Shanghai, economist Rajiv Biswas of S&P Global Market Intelligence told AFP. “The daily cargo flow at Shanghai Port returned to 95% of its normal level on May 24,” he said.
In April, at the height of the restrictions, the port was only operating at about 50% of its capacity, “which makes a big difference,” notes economist Iris Pang of ING. Electronics were the main lever for Chinese trade last month, both for imports (including chips) and exports, she said. For the past two years, Chinese exports have benefited greatly from the needs of the rest of the world in telecommuting equipment. But this demand is now “less robust,” says the economist.
Logically, China’s trade surplus jumped in May to $ 78.76 billion (73.42 billion euros). It was $ 51.1 billion a month earlier. After two months of grueling containment for residents and the economy, Shanghai lifted most anti-covid restrictions in early June. For its part, the Beijing capital, which was slowing down last month after an epidemic resurgence, has regained a near-normal life in recent days.
“Redouble your efforts”
This will allow consumption to “recover” which will mechanically lead to a stronger rebound in imports in the second half, warns Biswas. Health measures in recent months have discouraged travel and penalized household consumption, now threatening the growth of the Asian giant.
Premier Li Keqiang, who is constantly making a gloomy statement about the national economy, urged on Wednesday to “redouble efforts to remove obstacles” to the recovery, according to the official China News Agency. Fearing sanctions from their hierarchy in the event of a covid case, some local officials tend to favor sometimes zealous health measures, to the detriment of the economy.
“All localities need to effectively coordinate the response to Covid-19 with economic development […] and get business back to normal as soon as possible, ”Li Keqiang insisted, according to the minutes of a meeting on the economy. The economic downturn jeopardizes Beijing’s growth target of about 5.5 percent in a politically sensitive year, which is expected to see Xi Jinping re-elected as head of the Chinese Communist Party (CCP) in the fall.
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