China's trade surplus just narrowed -- but not with the United States

Thomas Peter-Pool/Getty ImagesChinese President Xi Jinping and US President Donald Trump in Beijing, China.

China’s trade surplus narrowed in May, driven lower by a surge in imports.

According to China’s National Bureau of Statistics (NBS), a trade surplus of $US24.92 billion was recorded in May, down from $US28.78 billion a month earlier.

Markets were looking for an increase to $US31.9 billion.

Despite the narrowing in the headline surplus, the surplus with the United States went in the other direction, lifting to $US24.58 billion from $US22.15 billion a month earlier.

It brings the US trade deficit with China to almost $US105 billion for first five months of the year. President Donald Trump cites the US trade deficit with China as a key justification for his protectionist policies that have led to a raft of new tariffs against not just China but key strategic allies including Canada and the EU.

With the deficit showing no signs of reducing, trade tensions between the US and China are unlikely to dissipate any time soon.

Helping to explain the decline in the headline surplus, China’s NBS said the value of imports grew substantially faster than exports over the year.

Imports surged by 26% over the year, an acceleration on the 21.5% increase seen in the 12 months to April.

The increase was substantially faster than the 18.7% lift expected by economists, reflecting both stronger demand from within China along with higher raw materials prices.

In contrast to acceleration seen in imports, export growth slowed fractionally, falling to 12.6% from 12.9% in the year to April.

That was still above the 10% increase that had been expected by economists, providing another indicator of the improvement seen in the global economy over the past year.

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