China Exports Post Unexpected Gain But Rebound Seen as Temporary

(Bloomberg) -- China’s exports unexpectedly rose in April aided by stronger shipments to South East Asia, though with the coronavirus pandemic damaging global demand that increase is likely to be temporary. Imports fell.

• Exports rose 3.5% in dollar terms in April from a year earlier, while imports dropped 14.2%, the customs administration said Thursday. That left a trade surplus of $45.3 billion for the month. Economists had forecast that exports would shrink by 11% while imports would contract by 10%.

Key Insights

• S&P 500 futures extended gains and the offshore yuan rose after the better-than-expected data
• Export data in yuan terms indicated that a rise in shipments to SE Asia drove the better-than-expected performance. Shipments to Asean rose 3.9% in the first four months of the year. Exports to the EU dropped 6.6%, while to the U.S. they fell 15.9%.
• China’s exports usually start slowly in the first quarter due to the Lunar New Year and then rise from April. While there were some signs in March of a recovery from the domestic slump at the peak of the coronavirus outbreak, restrictions in other parts of the world to contain the pandemic had been expected to weigh on export orders and disrupt supply chains.
• “April shipments may have been boosted by exporters making up for shortfalls in the first quarter due to supply constraints then,” according to Louis Kuijs, head of Asia economics at Oxford Economics Hong Kong Ltd. “As heralded by the weakness of new export orders in the PMIs, exports should weaken significantly in the near term as China’s key trading partners fall into deep recession.”
• The earliest indicators for the economy in April showed the nascent rebound was already losing momentum.
• The surprise increase in exports wasn’t uniform across Asia - South Korea’s exports in April fell by over 24%, the biggest drop since the global financial crisis, with shipments to all destinations down sharply.

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• “As the volume of commodity imports actually rose, the decline in imports was driven by falling commodity prices,” said Raymond Yeung, chief China economist at Australia & New Zealand Banking Group in Hong Kong. “April’s exports also reflected the pent-up demand of previous export orders for electronic products. Global work-from-home is also expected to be contributory to certain consumer electronic products. Nonetheless, this figure does not bode well for the US-China trade relationship. Trump’s administration will certainly press for more going forward.”
• Almost 2.8 trillion yuan ($395 billion) worth of mechanical and electrical goods were shipped in the first four months, with more than 800 billion yuan of that just in April, according to the data.

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With assistance from Bloomberg