China trade: coronavirus outbreak threatens temporary ‘shock’ after May figures fell short of expectations
- Guangdong province accounts for a significant portion of China’s total exports, but analysts say recent outbreaks may slow turnover through this month
- Rise in imports in May reflected an increase not in volume, but in value, which could have been inflated due to much higher commodity prices last month
A coronavirus outbreak in southern China looks to have a “transitory shock” on trade this month after exports fell short of expectations in May despite hitting a 10-year high.
“Exports surprised a bit on the downside, maybe due to coronavirus cases in Guangdong province slowing down the turnover at the Shenzhen and Guangzhou ports,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management. “But I expect this shock to be transitory.”
He noted that Guangdong province accounts for around 24 per cent of China’s total exports. Over the weekend, the government stepped up its policies to curb the coronavirus risk in Guangdong.
02:11
Guangzhou tightens Covid-19 controls as mass tests expose more cases in Chinese city
For exports, it was the 11th consecutive period of growth. But again, the export drop of 3.3 per cent in May last year means the latest figures also started from a low base.
“I think the risk of a supply-chain disruption is rising, and export prices/shipping costs will likely rise further. Guangdong province plays a critical role in the global supply chain,” Zhang said. “Turnover in Guangdong ports will likely remain slow in June. Other ports in China will likely become more cautious as well.
“Since the end of May, there have been around 10 coronavirus cases daily in Guangdong, where most electronics factories are located,” said Iris Pang, the chief economist for Greater China at ING.
“Shipments from the port in Shenzhen that process most of the electronics throughput have been affected by the coronavirus. Port workers now have to have Covid tests, and port operations have been disrupted. Some factories in Guangdong were also affected by the coronavirus, mostly caused by workers queuing up for testing.
“As such, we expect that June’s trade and production data will be affected. This could push up prices of electronic goods in general and affect China’s export prices and eventually import prices in the US and Europe. Supply chains in Asia will also likely be disrupted.”
China’s total trade surplus stood at US$45.53 billion in May, compared with US$42.85 billion in April.
Also last month, China’s often scrutinised trade surplus with the United States rose to US$31.78 billion from US$28.11 billion in April.
China’s imports from the US rose by 40.53 per cent to US$13.11 billion in May, while exports rose by 20.6 per cent to US$44.89 billion.
The Association of Southeast Asian Nations (Asean) remained China’s largest trading partner last month, followed by the European Union and the US.
China’s exports to Asean members rose by 40.59 per cent to US$39.19 billion in May compared with a year earlier, while imports from the 10-member economic union rose by 53.77 per cent to US$33.13 billion.
Additional reporting by He Huifeng