China's trade data for May has come in mixed

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Chinese trade data for May has come in mixed, with an improved performance from imports offset by a weaker-than-expected result for exports.

According to China’s Customs Bureau, the value of imports in US dollar terms fell by 0.4% compared to the levels of a year earlier, easily accounting forecasts for a steeper drop of 6.0%.

Not only was it a sharp improvement on the 10.9% decline seen in the year to April, it marked the slowest annual contraction since October 2014.

Although seemingly a bullish development, there were once again anomalies in the data, particularly when it came to cross-boarder flows between China and Hong Kong.

According to Bloomberg, the dollar value of imports from Hong Kong surged by a record 243% compared to a year earlier, surpassing the previous record of 204% set just one month earlier.

“(This) suggests China‚Äôs issues with fake trade invoices as a back-door channel to circumvent capital controls is getting worse,” noted Bloomberg.

On the other side of the ledger the monthly export performance underwhelmed, falling 4.1% from 12 months earlier.

The result was below expectations for a decline of 3.6%, and an acceleration on the 1.8% decline registered in April.

Much of the weakness was concentrated in the value of exports to the United States which skidded by 12%. In comparison, those to the European Union fell by a smaller 2.1%.

Combined, it saw the nation’s trade surplus come in at US$49.98 billion, up from US$45.56 billion in April but below the US$58 billion figure expected.

Despite the mixed nature of the report, markets have taken the view, on this occasion at least, that the beat on imports is a sign of an improvement in Chinese demand, pushing aside the weak exports figure that points to tepid external demand for Chinese goods and services.

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