China's trade stuck in contraction

China's both exports and imports is expected to contract yoy again in May. For exports, the sharp contraction in March caused very negative carry-over effects for the data in the following months. In April, the mom rate was a very decent 22% but that only lifted the yoy rate to -6.4% from -15%. It is likely to be the case again in May.

Given the weak export orders suggested by the PMI reports and the disappointing export figures from Korea and Taiwan, the forecast of 6.4% mom growth is on the optimistic side, however, the yoy rate will improve only modestly to -4%, says Societe Generale. Import contraction started in November during a period when global oil prices started to fall off the cliff. 

"Now that oil prices are stabilising and crawling back, import growth should follow suit. However, the improvement would not be quick. First, mathematically yoy growth lags mom changes mathematically. Second, China's domestic investment demand, the other factor behind weak imports, is slow in recovering", according to Societe Generale.