Updated 11:29 AM EDT, Tue, Jun 16, 2020

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China Economy Update: May Import Drops, Export Declines

China Import Export

(Photo : Reuters) China's May economic data shows that the country's import demand dropped by 18 percent, while export also fell by 2.5 percent compared to last year.

Chinese imports for the month of May dropped to its lowest level in three months while export continues to decline for the third straight month.

Bloomberg reports that China is still experiencing a slowdown in trade as official figures shows that the country's import was 18.1 percent less than it was last year.  Chinese exports fared no better - dropping at least 2.5 percent lower than 2014. 

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The sharp fall on imports resulted in net gain for China amounting to 366.8 billion yuan or $59.1 billion.  A healthy demand for Chinese goods in the United States halted further drops in exports, according to experts.

The Chinese government said that the drops are due to a slowdown in the country's domestic market. Authorities are reportedly preparing to offer favorable financial deals to local governments to encourage them to continue various construction projects.

Zhao Yang, an economist with Hongkong-based Nomura Holdings, said the demand in China's domestic market will depend on the government's stimulus package.

Some countries are already feeling the slump of China's import.  Australia's growth in GDP for the year is likely to be in jeopardy as China's demand for its iron ore dropped by 8.5 percent this May in contrast to last year's demand, according to the Australian Financial Review.

The Wall Street Journal interviewed Macquarie Securities representative Larry Hu about his company's view on the China's current trade situation.  Hu said he thinks China's trade surplus this year will probably be the biggest yet.  He estimated that it could reach up to $592 billion in contrast to last year's $380 billion.

Minggao Shen of Citigroup believes that the China's dropping import demand is due to prices rather than the lack of demand. 

Conference Board spokesperson Andrew Polk said that the lack of domestic investors is the main reason why China's imports are dropping.  He sees this as evidence that the country's domestic market is rather weak.  Although the import slowdown will result in huge trade surplus for China, he does not see how Chinese exports will help alleviate the situation.

Liu Li-Gang from ANZ Research is more optimistic.  He predicts that both domestic investment and consumption will increase in the next two quarters since the government fiscal incentives will soon be felt by then.

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