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How China’s Structural Shift Is Impacting Its Growth in 2017

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Part 2
How China’s Structural Shift Is Impacting Its Growth in 2017 PART 2 OF 4

Why China’s Trade Surplus Rose at a Slower Pace in May 2017

Comparable rise in imports compared to exports

China’s (FXI) trade surplus saw a rise in May 2017 as compared to the previous month. However, it narrowed in May 2017 as compared to the same period last year, as imports are increasing at an equal pace compared to exports. Currently, China is facing lower demand from international markets, and the rising protectionism is expected to make matters worse for global trade.

It is important to understand China’s (MCHI) trade balance, as it constitutes about 56% of total trade volume globally, thereby impacting both domestic and international markets. Let’s look at China’s projected trade balance for the next year in the below chart.

Why China’s Trade Surplus Rose at a Slower Pace in May 2017

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Trade surplus in May 2017

China’s (ASHR) trade surplus fell to $40.8 billion in May 2017 as compared to $44.7 billion in the same period last year. However, the trade surplus in May 2017 continued to increase at a slower pace for the third consecutive month but missed the market expectation of a $46.3 billion surplus. The weaker performance in May 2017 as compared to May 2016 is mainly due to rising imports in comparison to exports. The exports in May 2017 rose 8.7% in May 2017 as compared to a decline of 4.1% in May 2016. In contrast, the imports rose 14.8% in May 2017 as compared to a 0.4% increase in May 2016.

Expectations

China is experiencing an increase in foreign trade in 2017, which is likely to support its economic activity. According to its Ministry of Commerce, China’s exports and imports are expected to stabilize and improve in 2017. China’s initiative of “Belt and Road,” which aims to build connectivity between Europe (VGK) and Asia (AAXJ) is also expected to help global (ACWI) trade in the future.

Meanwhile, if we take cues from the 1Q17 performance, foreign trade in China has risen in 2017. China’s foreign trade volume was at 6.2 trillion renminbi in 1Q17, an increase of 21.8% on a year-over-year basis as compared to the same period last year as per the data from the General Administration Customs of China.

Let’s look at the GDP growth in China over the last year in our next article.

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