China’s May Trade Data Surprise Baffles

What is so surprising about China’s trade figures of May, released today, is not that they so outstripped  analysts’ expectations, but that both imports and exports seemed so strong. In raw value, they were record breaking. Exports rose 15% year-on-year, to $181.1 billion, with a significant rise in shipments to the U.S. and even a trade with the E.U. rebounding. May’s imports rose by 12.7% year-on-year to $162.4 billion. The monthly trade surplus edged up to $18.7 billion, $300 million higher than in April. In the first five months of the year, exports to the slow-growing U.S. rose by 12% and even those to eurocrisis-gripped Europe rose 1.3%.

The May trade numbers drive such a brilliant shaft of light through the gloom of the other economic indicators released in the past few days, that this Bystander wonders if they are simply an aberration, an ever-present risk with monthly data. Yet, they could also be a harbinger of a brake to the slowdown in growth that sparked the surprise 25 basis points cut in interest rates last week, an aggressive easing of monetary policy that saw higher than expected bank lending in May, and talk of a new stimulus package, albeit not one using the S-word. If that indeed is the case, more spending, by way of advancing planned social infrastructure spending, could remain in reserve.

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