May Foreign Trade Increased Confusion: Export Movements Exceed The Expected Downside Risks Must Be Vigilant

Two months after the most stringent new real estate policy in the history, when the European sovereign debt crisis intensified, the Chinese economy handed over the answer in May - June 11th, the National Bureau of statistics released the May economic data.

"On the whole, data are mixed, especially external demand is beyond expectations. China's economy is still in recovery, but the risk of the fourth quarter should be vigilant."

Liu Yuanchun, vice president of School of economics, Renmin University of China, told reporters on China business newspaper.

Export paction

Export growth in May surged to 48.5% from April's year-on-year growth rate of 30.5%, almost entirely higher than all market expectations.

As exports surged, import growth slowed down, with a trade surplus of 17 in April.

Billion US dollars to $19 billion 500 million.

On the afternoon of June 10th, the Department of Commerce, the import and export division and other relevant experts conducted the May foreign trade data forum.

"This is the third highest level of exports in the past ten years. In 2001 and 2005, there was a new export boom."

An expert in the forum said, "the Ministry of Commerce felt a bit sudden for the export data of super high in May. The low base is only part of the reason, but it is not the main reason."

Liu Yuanchun believes that the strong base for export growth is due to a 26.4% decline in exports in May last year, but the most fundamental reflection of the recovery of the world economy is that the global economy is at a critical point of recovery.

According to statistics, in May, China's export growth to the United States increased sharply from 19.1% last month to 44.3%, and exports to the other two economies, EU and Japan, increased by 49.7% and 37.1% respectively, while ASEAN's export growth jumped by 48%.

On the structure of export products, there is a full flowering situation.

Whether high-tech products, mechanical and electrical products, or labor intensive clothing shoes and hats, or metal primary products, have seen substantial growth.

In response to the strong growth of external demand, relevant departments of the Ministry of Commerce have adopted a cautious attitude.

The experts who participated in the discussion of the Ministry of Commerce told reporters that the Ministry of Commerce had always been less aware of exports, and thought that export growth would be in a relatively low position in the future, and the deficit would often occur. Therefore, the withdrawal of active foreign trade policies, such as the RMB exchange rate, export tax rebate adjustment and trade financing, has been relatively cautious.

It was a touch to them after the data came out in May, but they said they had to look at the future export figures.

Domestic demand drop

A slight difference from the strong growth in external demand is that domestic demand in China dropped in May, making analysts worried about the risk of future economic downturn.

After months of regulation, China's real estate market finally began to show signs of adjustment in May.

In the month of May, the area of commercial housing sales decreased by 12 million 740 thousand square meters, down 15.8%.

Sales of commercial housing decreased by 111 billion 300 million yuan from last month, down 25%.

Benefiting from the promotion of the new construction area, 1~5 investment in real estate development increased by 38.2% over the same period last year, but it is still difficult to drive the growth of investment. Before May, the fixed asset investment in urban areas increased by 25.9% over the same period last year, and the growth rate continued to fall.

In May, industrial added value increased by 16.5% over the same period last year, down 1.3 percentage points from April.

However, under the impetus of inflation, the total retail sales increased by 18.7% in May, 0.2 percentage points faster than that in April. Even after deducting price factors, the actual retail sales growth is still over 15%.

"Real estate regulation has shown signs of initial adjustment, such as volume and price, but the impact on investment and consumption has not yet been reflected.

As a result, domestic demand in May showed signs of decline, but the turning point of the overall downturn has not yet appeared.

Cao Heping, Professor of economics at Peking University, said: "if the total retail sales growth is below 18%, I believe that the real estate regulation is beginning to spread to consumption, because housing involves a series of industries such as downstream decoration, electricity and so on, and the impact is very far-reaching.

But it is not yet clear that there is a lag in policy.

Cao Heping said: "at present, external demand is strong and domestic demand is stable, but the European sovereign debt crisis and real estate regulation policies have lagged effects. The risk of economic downturn will be concentrated in the fourth quarter of May."

However, Yifu Lin, President and chief economist of the world bank, told our reporter that the risk of China's economic double recession is small.

"The GDP of China's economy will increase by 9.5% this year.

If the worst case scenario occurs in European sovereign debt countries, it will have a direct impact on China's exports and investment in China.

Yifu Lin said.

Yifu Lin believes that there is no possibility of double recession in China.

"Generally speaking, the Chinese government has a lot of financial space. If the external environment deteriorated, the Chinese government can further adopt fiscal policy to improve infrastructure and attract foreign investment further, so the risk of such a recession is very small."

Cao Heping said that the economic data in May were not bad, but the policy should be forward-looking.

"We must take into account the latest changes in the environment and factors. Therefore, a series of monetary contraction policies should be looked at for the time being. It is not appropriate to introduce more stringent tightening measures, such as raising interest rates."