Strong Chinese trade balance data likely to provide upside surprise to Q2 GDP, says ANZ Research

Solid momentum in China’s trade balance data is expected to provide some upside to Q2 GDP growth. Trade data, including export growth, beat consensus in April and May, showing few signs that the trade sector has been much affected by the on-going China-US trade tension. This may provide upside surprise to Q2 GDP growth, which is due on July 16.

Strong import momentum continued in May, led by high-tech products. High-tech product imports continued growing in double-digits for three consecutive months, contributing 7.3ppt to overall import growth in May. Imports of electronic integrated circuits grew 36 percent y/y in May, taking monthly average growth for the first five months to 37.6 percent y/y.

Major commodity imports have continued recovering on the back of steady domestic activities, with coal and iron ore imports rising 0.6 percent y/y and 2.9 percent y/y. The trend is expected to continue in the coming months on the back of recovering manufacturing activities. 

Exports grew in double-digits, supported by mechanical and electronic (ME) exports. ME exports – which account for about 60 percent of China’s total exports – increased 14.8 percent y/y in May, contributing 8.3ppt to overall export growth. High-tech product exports also grew steadily by 17.7 percent y/y in May, the seventh month of double-digit growth since November 2017.

"We remain alert to the risks surrounding China-US trade negotiations, which re-emerged after President Trump recently said that USD50bn worth of Chinese products are still subject to 25 percent import tariffs, with the product list to be unveiled on June 15," ANZ Research commented in its latest report.

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