China’s May export numbers were much stronger than expected. With the world’s economy slowing, it is hard to imagine where those exports went. It is even harder to figure out how this success can continue.
Exports rose 15.3% last month, compared to the same quarter in 2011. The figure was twice what most analysts expected. Exports rose only 4.9% in April. A drop in the value of the yuan may have helped the May number. Imports rose mysteriously by 12.7% in May, a shock because a drop in economic activity in the People’s Republic should have hurt consumer and business demand alike.
Export levels to the European Union have to get worse, and probably quickly. The recession that started in many countries there in the first quarter of this year will accelerate as the year passes. Consumer spending, PMI and business optimism are all down in the region, even in Germany. A new $125 billion bank bailout for Spain may help the nation’s debt and deficit problems and rescue its banks, but most politicians in the country have made it clear that the economy itself will not recovery for a very long time. Its 25% unemployment is not likely to change soon. Unemployment is just as bad in Greece, although that economy is too small to hurt China’s exports much. But most of the balance of Europe’s larger economies have suffered a rise in joblessness, too.
Because so much of Europe’s trade is among the EU members, a fall-off in exports from most nations there is another sign of slowing. If trade among these nations is any indication, then China’s exports to the region will slow as well.
China’s chance to make up for the problems in Europe might be its exports to the United States. But the American economy has slowed as well. So has economic activity in the largest developing nations, particularly India and Brazil.
China may have had a good month for trade in May. That probably will be its last good month this year.
Douglas A. McIntyre