China’s exports contracted in May as global coronavirus lockdowns continued to devastate demand, while a sharper-than-expected fall in imports pointed to mounting pressure on manufacturers as global growth stalls.

The sombre trade readings for the world’s second-biggest economy could pile pressure on policymakers to roll out more support for a sector that is critical to the livelihoods of more than 180 million workers. Total trade accounts for about a third of the economy.

Overseas shipments in May fell 3.3 per cent from a year earlier, after a surprising 3.5 per cent gain in April, customs data showed on Sunday. That compared with a 7 per cent drop forecast in a Reuters poll.

While exports fared slightly better than expected, imports tumbled 16.7 per cent compared with a year earlier, worsening from a 14.2 per cent decline the previous month and marking the sharpest decline since January 2016.

It had been expected to fall 9.7 per cent in May.

“Exports benefited from the ASEAN (Association of Southeast Asian Nations) market and exchange rate depreciation, while imports were affected by insufficient domestic demand and commodity price declines,” said Wang Jun, chief economist of Zhongyuan Bank.

As a result, China posted a record trade surplus of $62.93 billion last month, the highest since Reuters started tracking the series in 1981, compared with the poll’s forecast for a $39 billion surplus and $45.34 billion surplus in April.

China’s trade surplus with the US widened to $27.89 billion in May, Reuters calculation based on customs data showed.

Headwinds

Both official and private factory surveys for May showed sub-indices for export orders remained deep in contraction. Profits at China’s industrial firms fell almost 30 per cent in the January-April period.

Analysts said bright spots such as exports of medical supplies, of which China has dominated the supply chain, masked the strong headwinds faced by exporters stuck with unsold stock and cancelled orders from abroad.

In the first half of May, China shipped 63.2 billion yuan of medical supplies, Reuters calculations from customs data showed, compared with 71.2 billion yuan in the March-April period.

“Even though the export performance exceeded expectations, the difficulties faced by traditional trade enterprises should not be ignored,” said Zhang Yi, chief economist at Zhonghai Shengrong Capital Management.

Highlighting the uncertain outlook, the Chinese government said in late May it was not setting an annual growth target, for the first time since 2002, reflecting a cautious stance on policy easing, although some expect domestic demand to bounce back somewhat, while export conditions remain unpredictable.

The economy shrank 6.8 per cent in the first quarter from a year earlier.

“In the future, exports will basically see negative growth, but it is not necessary to be too pessimistic. It should be within -10 per cent,” Zhang said.

“Imports are subject to greater uncertainty, depending on the recovery of domestic market demand and the implementation of the Phase 1 agreement between China and the United States,” he said.

Corona fight defence

The Chinese government on Sunday strongly defended its handling of the coronavirus, pushing back at criticism that officials had suppressed early reports of the outbreak and contending instead that China had set a strong example for how to combat it.

A top Chinese official said at a news meet in Beijing that the government and state news media had provided early, timely and extensive information since the first cases appeared in Hubei Province late last year. In an apparent reference to the Trump administration’s numerous assertions that China is to blame for the subsequent pandemic, he complained bitterly about what he described as foreign lies and slanders.

“Those are completely unwarranted and unreasonable,” said the official, Xu Lin, who oversees the State Council Information Office. On Sunday the agency published a detailed report on China’s epidemic response.