By Yukun Zhang, Qiaoyi Li and Ryan Woo
BEIJING (Reuters) -China’s May exports growth slowed to a three-month low as U.S. tariffs slammed shipments, while factory-gate deflation deepened to its worst level in two years, heaping pressure on the world’s second-largest economy on both the domestic and external fronts.
Exports expanded 4.8% year-on-year in value terms in May, slowing from the 8.1% jump in April and missing the 5.0% growth expected in a Reuters poll, customs data showed on Monday, despite a lowering of U.S. tariffs on Chinese goods which had taken effect in early April.
Imports dropped 3.4% year-on-year, deepening sharply from the 0.2% decline in April and worse than the 0.9% downturn expected in the Reuters poll.
Exports had surged 12.4% year-on-year and 8.1% in March and April, respectively, as factories rushed shipments to the U.S. and other overseas manufacturers to avoid U.S. President Trump’s hefty levies on China and the rest of the world.
While exporters in China found some respite in May as Beijing and Washington agreed to suspend most of their levies for 90 days, tensions between the world’s two largest economies remain high and negotiations are underway over issues ranging from China’s rare earths controls to Taiwan.
Trade representatives from China and the U.S. are meeting in London on Monday to resume talks after a phone call between their top leaders on Thursday.
China’s May trade surplus came in at $103.2 billion, up from the $96.18 billion the previous month.
Beijing in May rolled out a series of monetary stimulus measures, including cuts to benchmark lending rates and a 500 billion yuan low-cost loan program for supporting elderly care and services consumption.
The measures are aimed at cushioning the trade war’s blow to an economy that relied on exports in its recovery from the pandemic shocks and a protracted property market slump.
DEFLATIONARY PRESSURES
Producer and consumer price data, released by the National Bureau of Statistics on the same day, showed that deflationary pressures worsened last month.
The producer price index fell 3.3% in May from a year earlier, after a 2.7% decline in April and marked the deepest contraction in 22 months, while consumer prices extended declines, having dipped 0.1% last month from a year earlier.
Cooling factory activity also highlights the impact of U.S. tariffs on the world’s largest manufacturing hub, dampening faster services growth as suspense lingers over the outcome of U.S.-China trade talks.
(Reporting by Yukun Zhang, Qiaoyi Li and Ryan Woo; Editing by Jacqueline Wong and Shri Navaratnam)
