The Puzzle Of High Increase In Foreign Trade In May: Be Alert To The Risk Of Unexpected Decline In Export Changes

Two months after the introduction of the toughest new real estate policy in history, and at a time when the European sovereign debt crisis is intensifying, China's economy handed over its answer paper in May - on June 11, the National Bureau of Statistics released the economic data of May.

"On the whole, the data is mixed, especially the external demand has exceeded people's expectations. China's economy is still in a recovery state, but the risk of decline in the fourth quarter should be vigilant." Liu Yuanchun, vice president of the School of Economics of Renmin University of China, told China Business Daily.

Export change

In May, the export growth rate soared to 48.5% from 30.5% in April, which was almost completely higher than all market expectations. Due to the sharp increase in exports, the growth rate of imports fell back, and the trade surplus increased from 17

US $19.5 billion.

In the afternoon of June 10, the General Affairs Department, the Import and Export Department and other departments of the Ministry of Commerce held an informal discussion with relevant experts on foreign trade data in May. "This is the third highest export in the past decade. In 2001 and 2005, exports hit a new high respectively." An expert who participated in the symposium said, "The Ministry of Commerce also felt that the export data in May was a bit sudden. The low base is only part of the reason, but not the main reason."

Liu Yuanchun believes that there is a low base for the strong growth of exports, because exports fell 26.4% year on year in May last year, but the most fundamental thing is that it reflects the recovery of the world economy. At present, the global economy is at the critical point of recovery.

According to statistics, the growth rate of China's exports to the United States in May increased significantly from 19.1% last month to 44.3%, while the exports to the other two major economies, the EU and Japan, increased by 49.7% and 37.1% respectively, while the growth rate of exports to ASEAN jumped by 48.0%. In terms of export product structure, there is a situation of full bloom. Whether high-tech products, electromechanical products, clothing, shoes and hats for labor-intensive products, or primary metal products, there has been a substantial increase.

In view of the strong growth of external demand, the relevant departments of the Ministry of Commerce took a cautious attitude. The aforementioned experts who participated in the forum of the Ministry of Commerce told the reporter that the Ministry of Commerce had always been relatively pessimistic about exports, thinking that the future export growth would be in a relatively low position, and the deficit would often appear, so it has always been cautious about the withdrawal of active foreign trade policies, such as the RMB exchange rate, export tax rebate adjustment, trade financing and other policies. After the data of May came out, they were touched, but they said they still wanted to see the future export data.

Decline in domestic demand

Slightly different from the strong growth of external demand, China's domestic demand fell back in May, which made analysts more worried about the risk of future economic decline.

After months of regulation, China's real estate market finally began to show signs of adjustment in May. In May, the sales area of commercial housing decreased by 12.74 million square meters, or 15.8%, compared with the previous month. The sales of commercial housing decreased by 111.3 billion yuan or 25.0% over the previous month. Benefiting from the promotion of the newly started area in the early stage, from January to May, the investment in real estate development grew strongly by 38.2% year on year, but it is still difficult to drive the growth of investment. In the first five months, the investment in urban fixed assets grew by 25.9% year on year, and the growth rate continued to decline. After deducting the price factor, the decline was even more obvious. In May, the added value of industries above designated size increased by 16.5% year on year, 1.3 percentage points lower than that in April.

However, driven by inflation, the total retail sales in May increased by 18.7%, 0.2 percentage points faster than that in April. Even after deducting the price factor, the actual retail sales growth still exceeded 15%.

"After the real estate regulation, there were signs of preliminary adjustment in real estate, such as trading volume and price, but the impact on investment and consumption has not been reflected. Therefore, the domestic demand in May showed signs of falling back, but the turning point of overall decline has not yet appeared." said Cao Heping, professor of the School of Economics of Peking University, "If the growth rate of total retail sales is less than 18%, I think that the real estate regulation has begun to affect consumption, because housing involves a series of industries such as downstream decoration and electricity, which has a very far-reaching impact. But it is still not clear that there is a lag in policy."

Cao Heping said: "At present, the external demand is strong in May, while the domestic demand is stable, but the European sovereign debt crisis and the real estate regulation policy have lagged behind, and the risk of economic decline will be concentrated in the fourth quarter."

However, Lin Yifu, President and Chief Economist of the World Bank, told our reporter that the risk of a double recession of China's economy is small. "China's economic GDP will grow by 9.5% this year. If the worst happens to European sovereign debt countries, it will have a direct impact on China's exports and Chinese investment," said Lin Yifu.

Lin Yifu believes that there can be no double recession in China. "Generally speaking, the Chinese government has a lot of fiscal space. If the external environment deteriorates, the Chinese government can further adopt fiscal policies, improve infrastructure, and further attract foreign capital. Therefore, the risk of this kind of economic recession is very small."

Cao Heping said that the economic data in May was good, but the policy should be forward-looking. "The latest changing environment and factors must be taken into account, so a series of monetary contraction policies in the early stage should be kept on the sidelines for the time being. It is not appropriate to introduce more drastic tightening measures, such as interest rate hikes."