China′s imports could return to growth this year | Business| Economy and finance news from a German perspective | DW | 08.06.2016
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China's imports could return to growth this year

China’s imports fell at their slowest pace in more than 18 months in May, according to official data, fueling optimism that domestic demand in the country, while still flagging, is on its way to recovery.

A year-on-year decrease of 0.4 percent in imports last month marked the slowest rate of decline since October 2014, where they grew at 4.6 percent. The May figure also soundly beat analyst estimates of a 6.8 percent decline, and is a significant improvement on the 10.9 percent slump in April.

"Recovering commodity prices and relatively resilient domestic demand are driving a recovery in import growth," Julian Evans-Pritchard, an analyst with research firm Capital Economics.

He predicted that imports were likely to keep climbing back up for the rest of the year and eventually return to growth, as “the continued feed-through from earlier policy easing helps to prop up domestic demand.”

But exports have been less able to recover. They slid 4.1 percent in May from a year ago, a further drop from the previous month’s 1.8 percent decline. Exports have been backsliding for eight of the last 10 months, as China’s economy grows at its slowest pace in a quarter of a century.

Steel and aluminum exports still going strong

However, Chinese steel and aluminum exports continued to rise in May, amid heightening irritation from China’s international trade partners, who’ve had to struggle to compete against the cheaply-priced products from China. Steel exports from the world's second-biggest economy grew 2.4 percent to 9.4 million tons.

Washington has slapped harsh tariffs on Chinese steel, while the EU has launched a dumping probe, as European manufacturers demand action similar to the US-style levies.

But at its recently concluded Strategic and Economic Dialogue with the US, China has since pledged to rein in steel production to help curb the global supply glut. However, no agreement had been reached for aluminum.

China central bank cuts export forecast

On Wednesday, China's central bank slashed its annual forecast for exports, predicting a drop for the second year in a row. Instead of its earlier 3.1 percent growth export forecast, the People's Bank of China's outlook now stands at -1 percent.

Despite the sobering export figures, the bank sees domestic recovery remaining on track, keeping its GDP growth forecast for 2016 at 6.8 percent - above the World Bank's bet of 6.7 percent. The World Bank is also projecting a further slowdown to 6.3 percent in 2018.
jd/uhe (Reuters, dpa)

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